SBA 7(a) Q&A
Short answer
A seller note with partial standby means that principal and/or interest payments can be made to the seller, but only if the SBA lender approves it based on the business's cash flow and other conditions.
For a seller note to count towards the buyer's equity injection, it must be on 'full standby' (no principal or interest payments for the life of the SBA loan). If the seller note is not counting towards equity, it can be structured with 'partial standby,' where payments can be made, but only after specific conditions are met and with the express written consent of the SBA lender. This typically involves the business demonstrating sufficient cash flow after all other debt obligations.
A $1,000,000 acquisition requires $100,000 equity injection. If a $50,000 seller note is used, it must be full standby. If the seller note is $150,000, the first $100,000 must be full standby, and the remaining $50,000 can be partial standby, allowing payments only if the business's Debt Service Coverage Ratio (DSCR) exceeds 1.25x.
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 2026-06-14. 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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