SBA 7(a) Q&A
Short answer
Yes, it is permissible for the seller to continue working in the business post-acquisition, even with a full standby note, provided they do not retain any control or ownership.
The seller's continued employment, typically for a transition period, is acceptable as long as it doesn't imply ongoing ownership, control, or an active role in management beyond a consultancy or training capacity. The full standby of the seller note is about financial subordination, not prohibiting employment.
A seller provides a $150,000 full standby note and agrees to stay on for six months as a consultant to train the new owner. This arrangement is permissible, as the seller has no ownership.
Insider move
Lenders ensure the seller's role is clearly defined as an employee or consultant, without any continuing ownership or management authority. They verify compensation is reasonable and not a disguised repayment of the standby note.
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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