For SBA lenders
Short answer
A full standby seller note must be on full standby for the entire life of the SBA loan, meaning no payments of principal or interest can be made.
For a seller note to count as equity injection for an acquisition, it must be on 'full standby.' This means that no payments of principal or interest, or any other compensation, can be made by the borrower to the seller for the entire term of the SBA loan, including any extensions. The intent is to strengthen the borrower's cash flow during the critical post-acquisition period.
A $100,000 seller note is part of a business acquisition with a 10-year SBA loan. The seller note must stipulate that no payments whatsoever will be made to the seller for the full 10-year term of the SBA loan.
Lenders must obtain a clear, signed standby agreement with explicit language prohibiting all payments. They must also verify that no hidden payments or benefits are being provided to the seller. Any deviation from full standby can lead to a repair or denial of the guaranty.
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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