SBA 7(a) Q&A
Short answer
No, if a seller note is fully subordinated and counts towards the buyer's equity injection, neither principal nor interest payments can be made to the seller during the SBA loan's term without prior written consent from the SBA lender.
A fully subordinated (full standby) seller note means that the seller agrees not to receive any payments (principal or interest) until the SBA loan is paid in full, or the lender gives express written consent for payments. This ensures the maximum amount of cash flow is available to service the senior SBA debt and that the seller's funds are truly 'at risk' as part of the equity injection.
You purchase a business with a $100,000 seller note on full standby. Even if the note states 5% interest, the seller cannot receive any of those interest payments until your SBA 7(a) loan is fully repaid, or the lender specifically approves it in writing.
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 2026-06-14. 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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