For SBA lenders
Short answer
If the seller retains any equity, even a minority stake, the SBA typically requires the seller to execute a full standby agreement for the life of the loan for any retained equity.
The SBA aims to ensure that the buyer fully controls the business and that the seller has truly exited the operation, especially if any proceeds from the sale are financed by the SBA loan. Retained equity is generally treated as a form of seller financing and is subject to standby provisions, ensuring the seller has no claim on the business's cash flow.
A buyer acquires 90% of a business, and the seller retains a 10% equity stake. The lender requires the seller to sign a standby agreement, stipulating no distributions or payments on this 10% equity until the SBA loan is repaid in full.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Standard 7(a) Authorization File Library
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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