SBA 7(a) Q&A
Short answer
No, a seller note with immediate interest payments, even if principal payments are deferred, does not qualify as 'full standby' under SBA rules; it is considered 'partial standby' or 'no standby.'
For a seller note to qualify as 'full standby' (which counts towards the equity injection), absolutely no payments of principal or interest are permitted during the standby period, typically for the life of the SBA loan or a minimum of two years. If interest payments are made, even with deferred principal, it's not full standby and therefore cannot be counted as buyer's equity injection.
A seller provides a $75,000 note, agreeing to defer principal for two years but still wanting monthly interest. This note would not count toward the buyer's 10% equity injection for their $750,000 acquisition because it is not on full standby.
Insider move
Lenders strictly enforce the full standby requirement for notes counting as equity. Any form of payment to the seller, including interest, disqualifies it as full standby equity and will be factored into the business's debt service capacity.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. 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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