SBA loan basics
Short answer
Yes, a seller note can count towards the equity injection if it is on "full standby" for the life of the SBA 7(a) loan, meaning no payments are made until the SBA loan is repaid.
For a seller note to qualify as equity injection for an acquisition, it must be on "full standby." This means no principal or interest payments can be made on the seller note until the SBA 7(a) loan is fully repaid. This demonstrates the seller's continued confidence in the business and reduces the debt burden on the buyer during the SBA loan's term.
A business is being acquired for $1,000,000. The buyer provides $50,000 cash, and the seller takes a $50,000 note that will not be paid until the SBA loan is repaid. This $100,000 total would meet a 10% equity requirement.
Lenders meticulously document the standby agreement to ensure the seller note is fully subordinated and on full standby. They verify that no payments will be made, directly or indirectly, on the seller note during the life of the SBA loan, protecting the SBA's primary lien position.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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