SBA 7(a) Q&A
Short answer
Yes, a seller note on full standby can accrue interest during the standby period, but this interest cannot be paid out until the SBA loan is fully repaid.
While principal and interest payments on a full standby seller note are prohibited during the SBA loan term, the note can still accrue interest. This accrued interest simply increases the total amount owed to the seller, payable only after the SBA loan is satisfied.
If a $100,000 seller note on full standby has an annual interest rate of 5%, that interest (e.g., $5,000 per year) would accrue and be added to the outstanding balance. The seller would then receive the original principal plus all accrued, unpaid interest once the SBA loan is paid off.
Lenders ensure the standby agreement explicitly states that accrued interest will not be paid until the SBA loan is fully satisfied. They verify that the accrual does not create an undue burden on the business after the SBA loan is repaid.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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