SBA 7(a) Q&A
Short answer
No, a seller with a standby note is not necessarily prohibited from post-sale employment, but the terms of employment must be reasonable and documented.
The SBA permits a seller to remain employed with the acquired business post-sale, even if they have a standby note, typically for a transition period. However, any compensation paid to the seller must be for actual services rendered, be reasonable for the industry and role, and be fully documented. It cannot be a disguised form of repaying the standby note.
A seller provides a $75,000 standby note as part of a $750,000 acquisition. The buyer also hires the seller for six months at $5,000 per month to assist with the transition. As long as the $5,000 per month is for legitimate work and is a fair market wage, it is generally acceptable.
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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