SBA 7(a) Q&A
Short answer
No, if a seller note includes principal payments during the first year of the SBA loan, it generally cannot be counted towards the buyer's required equity injection.
For a seller note to count as equity injection, it must be on 'full standby' for a minimum of two years. Full standby means no principal or interest payments can be made to the seller during this period. Any payment, even principal, within the first year would violate this rule, making the note ineligible as equity.
A $100,000 seller note is proposed for equity. If the terms specify $1,000 monthly principal payments starting three months after closing, this note would not qualify for equity injection because it's not on full standby.
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.
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