SBA 7(a) Q&A
Short answer
A standby seller note is a portion of the purchase price financed by the seller, where the seller agrees to defer all payments until the SBA loan is fully repaid.
For a seller note to count towards the borrower's equity injection and be acceptable in an SBA transaction, it must be on "full standby." This means no principal or interest payments can be made to the seller for the entire term of the SBA 7(a) loan. This strengthens the business's financial position from the SBA's perspective.
A $750,000 business acquisition requires a $75,000 equity injection. The buyer provides $50,000 cash, and the seller provides a $25,000 standby note that will not be paid until the SBA loan is retired.
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
SBA Form 1919 - Borrower Information Form
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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