SBA 7(a) Q&A
Short answer
Yes, the terms of a seller's post-closing consulting agreement can influence the standby status of their seller note, especially if compensation is excessive.
If a seller provides a note on full standby, any post-closing compensation (e.g., consulting fees, salary) must be for reasonable services actually rendered and at market rates. Excessive compensation could be viewed as a disguised repayment of the standby note, jeopardizing its equity status.
If a seller provides a $200,000 standby note and is paid $150,000 annually for 'consulting' with minimal duties, the lender might consider this excessive, reclassify a portion as disguised note repayment, and require additional buyer equity.
Insider move
Lenders ensure that seller post-closing arrangements do not circumvent the standby agreement. They scrutinize consulting or employment agreements to confirm compensation is reasonable, for actual services, and does not draw cash out of the business in a way that impacts loan repayment.
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 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. 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
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day