SBA 7(a) Q&A
Short answer
Yes, a seller providing a fully subordinated note can remain an employee or consultant for the business, provided their compensation is reasonable.
The SBA permits sellers who finance a portion of the acquisition through a fully subordinated note to remain involved in the business post-closing. However, any compensation paid to the seller for their services (as an employee or consultant) must be for actual, necessary services rendered, and must be at a reasonable, market-rate level. The compensation should not be a disguised form of early repayment on the seller note, which would violate the subordination agreement.
A $1 million business acquisition includes a $100,000 fully subordinated seller note. The seller is retained as a part-time consultant for six months at $4,000 per month. This compensation is acceptable if it reflects fair value for the consulting services.
Insider move
Lenders closely examine the terms of any post-closing employment or consulting agreements with the seller to ensure compensation is reasonable and not a circumvention of the seller note's standby requirements.
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.
More on seller notes & standby
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