SBA 7(a) Q&A
Short answer
No, a seller note on partial standby cannot count towards the required equity injection for an SBA 7(a) loan.
For a seller note to be considered part of the equity injection, it must be on 'full standby,' meaning no payments of principal or interest are allowed for the entire term of the SBA loan. A partial standby, which permits some payments, does not meet the SBA's definition of true equity and would not be accepted.
If you negotiate a $50,000 seller note that allows interest-only payments to the seller during the first two years, this would be considered a partial standby. As such, it would not be eligible to be counted as part of your required equity injection for the SBA 7(a) loan.
Insider move
Lenders will reject any seller note intended for equity injection if it includes partial standby terms, as it violates SBA policy. They must ensure that all funds counted as equity injection are truly subordinated to the SBA loan.
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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