SBA 7(a) Q&A
Short answer
Yes, a seller note can be on partial standby for an SBA 7(a) loan, meaning a portion is subordinate to the SBA loan, while another portion can be paid immediately or on different terms.
The SBA permits seller notes to be either on full standby or partial standby. For a note to count as equity injection, the portion on standby must be on "full standby" – no payments of principal or interest for the life of the SBA loan, or for a minimum of two years if the SBA loan is repaid in that timeframe. A partially standby note might have a portion that counts as equity and another portion that does not.
A buyer acquires a business for $1,000,000. The seller provides a $100,000 note. If $50,000 is on full standby (no payments for the life of the SBA loan) and the other $50,000 is to be paid monthly after 12 months, this would be a partial standby arrangement.
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
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