For SBA lenders
Short answer
Lenders must obtain a signed Standby Agreement from the seller, a copy of the seller note with specific subordination language, and a UCC search verifying no prior liens on the note.
For a seller note to qualify as equity injection, it must be on "full standby," meaning no principal or interest payments are due to the seller until the SBA 7(a) loan is fully repaid. The lender must obtain a formal Standby Agreement, signed by the seller and the borrower, explicitly stating these terms. The seller note itself must contain language subordinating it to the SBA loan, and the lender must perform a UCC search to ensure the seller has not granted a prior security interest in the note.
A $100,000 seller note is part of an acquisition. The lender would require a signed SBA-compliant Standby Agreement, review the seller note for explicit subordination language, and conduct a UCC search to confirm the note isn't pledged elsewhere.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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