SBA 7(a) Q&A
Short answer
A seller note on full standby cannot receive any principal payments until the SBA 7(a) loan is paid in full.
Full standby means that the seller's note is completely subordinated to the SBA loan. Neither principal nor interest payments can be made on the seller note for the entire duration of the SBA loan. The note essentially acts as a part of the borrower's equity until the SBA loan is retired.
If you have a $100,000 seller note on full standby as part of your $900,000 SBA loan with a 10-year term, the seller cannot receive any principal payments on that $100,000 note until after your 10-year SBA loan is fully repaid.
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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