SBA 7(a) Q&A
Short answer
Yes, a seller note with a full standby period of at least two years, where no principal or interest payments are made, can be counted towards the buyer's equity injection.
SBA regulations permit seller notes on full standby to be treated as part of the buyer's equity injection if the note's terms include no payments of principal or interest for a minimum of two years. If the full standby extends beyond two years, it further strengthens the equity position.
A buyer needs a $100,000 equity injection for a $1,000,000 acquisition. If the buyer injects $50,000 cash and the seller provides a $50,000 note on full standby for 5 years (no P&I payments), that $50,000 note can count towards the equity.
Lenders verify that the standby agreement explicitly states no principal or interest payments for the required period and that the seller understands and agrees to these terms. Proper documentation is crucial for SBA compliance.
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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