For SBA lenders
Short answer
SBA requires at least 10% of the total project costs to be injected by the borrower. Of this 10%, a minimum of half (5%) must be cash, or unencumbered assets, with the remainder (up to 5%) potentially being a seller note on full standby.
For a change of ownership, the borrower must inject at least 10% of the total project costs. This injection must consist of at least 5% cash or unencumbered assets. The remaining 5% of the 10% total injection can be in the form of a seller note on full standby for the life of the SBA loan. Any seller financing beyond the 5% that comprises the required injection must also be on full standby.
A business acquisition has a total project cost of $1,000,000. The borrower must inject at least $100,000. A minimum of $50,000 must be cash. The remaining $50,000 of the required injection could be from a seller note on full standby. If the seller provides a $150,000 standby note, $50,000 counts towards the injection, and the additional $100,000 is still on full standby.
Insider move
Lenders must carefully calculate the required equity and ensure the appropriate mix of cash/assets and standby seller notes. Miscalculating this or not ensuring proper standby terms can lead to a guaranty repair or denial. The standby note must be verified to meet all SBA requirements.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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