For SBA lenders
Short answer
A full standby seller note must explicitly state that no principal or interest payments are to be made to the seller until the SBA loan is paid in full, with no acceleration rights.
For a seller note to qualify as full standby, it must be completely subordinated in payment to the SBA loan. The note or a separate standby agreement must clearly state that no payments of principal or interest are permitted at any time until the SBA loan is fully satisfied. It must also waive any rights to accelerate payment or take collateral action against the business.
A $100,000 seller note states: 'No payments of principal or interest shall be made on this note until the Small Business Administration (SBA) loan, which is senior to this note, has been paid in full. The holder of this note waives any right to accelerate or demand payment prior to the full satisfaction of the SBA loan.' This language meets full standby requirements.
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.
More on standby agreements
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