SBA 7(a) Q&A
Short answer
A fully subordinated seller note can comprise up to half of the buyer's minimum required equity injection for a business acquisition.
While the buyer must provide a minimum cash injection (typically 10% of the project costs), the SBA allows a portion of the equity requirement to be met by a fully subordinated seller note. The seller note must be on 'full standby' (no principal or interest payments for the term of the SBA loan or a substantial portion thereof, typically two years minimum) and can account for up to 50% of the total minimum equity injection.
For a $900,000 acquisition, the minimum 10% equity injection is $90,000. The buyer must provide at least $45,000 in cash. The remaining $45,000 could come from a fully subordinated seller note.
Insider move
Lenders scrutinize the standby terms of the seller note to ensure it meets SBA requirements for subordination and payment restrictions. They verify the buyer's actual cash injection and the seller's commitment to the standby agreement.
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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