SBA 7(a) Q&A
Short answer
Yes, a seller note can count towards the buyer's equity injection, but it must be on full standby for the life of the SBA loan and cannot be repaid until the SBA loan is paid in full.
For a seller note to count towards the minimum equity injection, it must be on 'full standby'. This means no payments of principal or interest can be made on the seller note while the SBA loan is outstanding. The seller note must be unconditionally subordinated to the SBA loan.
If a $1,000,000 acquisition requires $100,000 equity, and the buyer provides $50,000 cash, a $50,000 seller note on full standby can satisfy the remaining equity requirement.
Insider move
Lenders verify the seller note's terms through a subordination agreement to ensure it meets the full standby requirements. They ensure the seller understands and agrees to these strict terms.
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 seller notes & standby
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