For SBA lenders
Short answer
A full standby agreement for a seller note must explicitly state that no payments of principal or interest will be made by the borrower until the SBA loan is paid in full, and that the seller will not accept any such payments.
To count as equity injection for an acquisition, seller financing must be on 'full standby.' This means the seller agrees to accept no payments (principal or interest) for the entire term of the SBA loan. The standby agreement must be unconditional and clearly specify this deferral, prohibiting any partial payments, interest accrual, or acceleration clauses that could compromise the borrower's ability to repay the SBA loan.
A seller provides $100,000 in financing for a business acquisition. The standby agreement for this note states: 'The borrower shall not make, and the holder shall not accept, any payment of principal or interest on this Standby Note until the SBA 7(a) loan (Loan #XXXX) is paid in full.' This explicit language ensures full standby status.
Insider move
Lenders must ensure the standby agreement is legally enforceable and unequivocally puts the seller's note on full standby. Any ambiguity or conditions allowing earlier payments would disqualify the seller financing from being counted as equity and could lead to a guaranty repair.
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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