SBA 7(a) Q&A
Short answer
A seller note on partial standby generally does not count towards the buyer's required equity injection. Only seller notes on *full* standby can potentially be considered part of the equity.
SBA rules specify that for a seller note to count towards the equity injection, it must be on 'full standby' for the entire term of the SBA loan, or at least for the first two years, with no payments of principal or interest during that period. A partial standby note, which allows for some payments, does not meet this strict definition.
If a buyer needs a $100,000 equity injection and the seller offers a $50,000 note with interest-only payments for the first year (partial standby), this $50,000 would not count towards the buyer's injection.
Lenders carefully review seller note terms to ensure they comply with SBA standby requirements. Misclassifying a partial standby note as equity could jeopardize the SBA guaranty, so lenders are very strict on this.
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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