SBA 7(a) Q&A
Short answer
If a seller note is partially on standby, only the portion that is on full standby (no payments until the SBA loan is repaid) can count towards the buyer's equity injection.
SBA rules differentiate between 'full standby' (no payments allowed for the life of the SBA loan) and 'partial standby' (payments are permitted, but usually junior to the SBA loan). Only the portion on full standby contributes to the buyer's required equity injection. The portion paid out at closing or on partial standby is treated as part of the purchase price that the SBA loan helps finance or as additional debt.
A $150,000 seller note consists of $50,000 paid at closing and $100,000 on full standby. Only the $100,000 portion will be recognized as part of the buyer's equity injection. The $50,000 paid at closing must be covered by the SBA loan or buyer's cash.
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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