Glossary · Your money in the deal
Disguised Seller Financing
In short
This occurs when seller financing is structured to appear as equity, a gift, or another form of capital to circumvent SBA's standby requirements for seller notes. The SBA rigorously scrutinizes transactions for this.
What it means in a deal
The SBA requires seller notes to be on full standby, meaning no payments can be made until the SBA loan is repaid. Sellers sometimes try to structure payments or 'consulting fees' to bypass this. Your lender will identify and reclassify any disguised seller financing, potentially jeopardizing your deal if not disclosed upfront. Be transparent.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Disguised Seller Financing
- Does the SBA 7(a) loan program allow for seller training period financing?
- How does seller financing structure impact the required equity injection for a business acquisition?
- What specific due diligence is required for seller financing in a change of ownership?
- What specific due diligence is needed for seller financing that is not on full standby?
- How much of my equity injection must be cash, rather than other assets or seller financing?
- Does the SBA 7(a) loan program allow for seller training period financing for the buyer?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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