SBA 7(a) Q&A
Short answer
Yes, a seller note that is on full standby for the life of the SBA 7(a) loan typically counts towards the buyer's equity injection.
For a seller note to count as equity injection, it must be on full standby, meaning no principal or interest payments are made until the SBA loan is repaid in full. The note must also be unsecured and subordinated to the SBA loan. This structure demonstrates the seller's continued vested interest and commitment to the business's success, similar to equity.
A buyer needs a $100,000 equity injection for a $1,000,000 acquisition. The seller provides a $75,000 note on full standby. The buyer then only needs to contribute an additional $25,000 in cash for the injection.
Insider move
Lenders verify that the seller note's standby agreement meets all SBA requirements, including full subordination and no payments. They ensure the total equity injection, including the standby seller note, meets the minimum percentage required.
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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