SBA 7(a) Q&A
Short answer
For seller financing to count as equity, the lender requires a formal subordination agreement ensuring the seller note is on full standby, with no payments until the SBA loan is fully repaid.
The due diligence for seller financing as equity injection centers on verifying the 'full standby' status. This means obtaining a written subordination agreement signed by the seller, explicitly stating no principal or interest payments can be made on the seller note while the SBA loan is outstanding. The lender must ensure no other terms contradict this subordination.
For a $75,000 seller note included in the buyer's equity, the lender will require a signed subordination agreement from the seller, explicitly detailing the standby terms and stating no payments are permitted during the SBA loan's life.
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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