Glossary · Doing the deal
In short
This is a legal claim on an asset that ranks lower than another claim in terms of priority for repayment if the borrower defaults. Buyers typically see this when a seller note is used as part of the equity injection, making it subordinate to the SBA loan.
The SBA requires any seller financing used for the buyer's equity injection to be on "full standby" or "partial standby," which means it has a subordinate lien position to the SBA's first lien. This arrangement protects the SBA and your primary lender by ensuring they get paid first from collateral if the business fails.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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