Glossary · Doing the deal
Fully subordinated
In short
Describes debt where the lender agrees to be repaid only after other specified debts, like the SBA loan, are fully satisfied. This reduces risk for the primary lender.
What it means in a deal
Any seller note or other debt from an affiliate must be fully subordinated to the SBA loan. This means no principal or interest payments can be made on that debt until the SBA loan is repaid, or under very specific conditions defined by a full standby agreement.
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 Fully subordinated
- If a seller takes a fully subordinated note, can they remain an employee or consultant after acquisition?
- Can the seller receive interest payments on a fully subordinated seller note during the SBA loan term?
- How does a lender evaluate the reasonableness of a business purchase price when the seller note is fully subordinated?
- Can a seller who takes a fully subordinated note also remain an employee or consultant of the business after the acquisition?
- Can a personal loan from a non-owner family member count as equity if fully subordinated to the 7(a) loan?
- For a $900,000 business acquisition, what percentage of the total required equity injection can come from a fully subordinated seller note?
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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