SBA 7(a) Q&A
Short answer
Yes, a seller note on full standby can have a fixed interest rate, but no principal or interest payments can be made on that note while it is on full standby.
The key requirement for a full standby seller note is that no payments of principal or interest are made to the seller during the term of the SBA loan (or a specified minimum period, typically two years). However, the note itself can still stipulate an interest rate, which may accrue and become payable once the standby period ends or the SBA loan is repaid. The interest rate type (fixed or variable) is not restricted, only the payment schedule.
A seller note for $75,000 is on full standby for an SBA loan. The note specifies a fixed interest rate of 6%. While the note is on full standby, no payments are made. The accrued interest would be added to the principal balance, becoming payable once the standby period concludes.
Insider move
Lenders primarily ensure that the terms of the standby agreement explicitly prohibit any payments, including interest, during the standby period. They confirm that the accrual of interest won't create an unmanageable balloon payment that could jeopardize the business's ability to repay the SBA loan later.
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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