For SBA lenders
Short answer
Lenders must verify the source and terms of seller financing, ensure it meets SBA standby requirements, and confirm its proper lien position relative to the SBA loan.
When seller financing is part of a change of ownership, the lender must ensure that it functions as true equity injection if it's on full standby. This means no payments (principal or interest) can be made on the seller note for the life of the SBA loan. If not on full standby, it must be clearly subordinated and accounted for in cash flow analysis.
A business acquisition includes a $100,000 seller note. The lender verifies the note is on full standby, meaning the seller agrees to receive no payments until the SBA loan is fully repaid. This also means the seller's lien (if any) is subordinated to the SBA loan.
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.
More on change of ownership underwriting
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