SBA 7(a) Q&A
Short answer
A seller note on 'full standby' must explicitly state that no principal or interest payments can be made until the SBA 7(a) loan is paid in full.
To be considered full standby, the seller note must be completely subordinate to the SBA loan. The standby agreement, signed by the seller, must legally prohibit any payments of principal or interest on the seller note for the entire term of the SBA loan, or until the SBA loan is repaid.
A $100,000 seller note would include a clause stating: 'No payments of principal or interest shall be made on this Note until the SBA 7(a) loan (Loan #XXXXXX) is paid in full.' This agreement would be formally executed and recorded.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of the current SBA 7(a) rulebook for change-of-ownership / partner buyouts. 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 partner & owner buyout
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