SBA 7(a) Q&A
Short answer
If the seller remains an employee for a transition period, it can be acceptable, but their compensation must be reasonable and not tied to any payments on a standby seller note.
The SBA permits sellers to stay on as employees or consultants for a reasonable transition period. However, any compensation paid to the seller must be for actual services rendered at a fair market rate. Crucially, this compensation cannot be a disguised payment on a seller note that is on full standby, as that would violate standby terms.
A seller might be hired for six months at $10,000 per month to assist with the transition. This is acceptable as long as it's for legitimate services and not covert repayment of their $100,000 standby note.
Insider move
Lenders carefully review employment or consulting agreements with the seller to ensure terms are commercially reasonable and do not circumvent standby agreements. They look for clear separation between compensation for services and payments on any seller notes.
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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