SBA loan basics
Short answer
Yes, a seller-financed portion of an acquisition can count towards the buyer's equity injection (down payment), provided it is on 'full standby' terms.
Similar to loans from relatives, a seller note can be considered part of the equity injection if it is on 'full standby' for the entire term of the SBA loan. This means the seller agrees to receive no payments (principal or interest) until the SBA loan is fully repaid, ensuring that the business's cash flow is directed towards the senior SBA debt.
If a business is being acquired for $700,000, and the buyer provides $70,000 (10%) cash, the seller could finance another $70,000 (10%) through a standby note. This would give the buyer a total equity injection of $140,000 (20%), making the deal more appealing to lenders.
Insider move
Lenders meticulously review the standby agreement for the seller note, ensuring it explicitly states no payments will be made until the SBA loan is satisfied. They also consider the seller's ongoing involvement, if any, and the valuation of the business.
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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