For SBA lenders
Short answer
The agreement must explicitly state that no payments of principal or interest are permitted for the full term of the SBA loan, or until the SBA loan is paid in full, and that the note is subordinate to the SBA loan.
For a seller note to count as equity injection, it must be on "full standby," meaning the seller cannot receive any payments until the SBA loan is satisfied. This ensures that the capital remains in the business and is not diverted, prioritizing the SBA loan for repayment. The agreement must also clearly state the note is unsecured by business assets.
A seller note for $150,000 is used for equity injection. The standby agreement specifies: "No payments of principal or interest shall be made on this note until the SBA loan (Loan #XXXX) is paid in full. This note is subordinate to all indebtedness owed to [Lender Name] under said SBA loan."
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Standard 7(a) Authorization File Library
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
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day