Glossary · The loan itself
Fully subordinated note
In short
This is a seller note where the seller agrees that repayment of their note is entirely secondary to the SBA 7(a) loan. As a buyer, you care because this note can count towards your minimum equity injection.
What it means in a deal
In an SBA acquisition, a fully subordinated seller note is crucial for meeting the equity injection requirements. The seller cannot receive any principal or interest payments on this note until the SBA loan is fully repaid, or certain conditions are met, as stipulated in a full standby agreement. This arrangement reduces risk for the SBA lender.
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 note
- 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?
- For a $900,000 business acquisition, what percentage of the total required equity injection can come from a fully subordinated seller note?
- What documentation must a lender obtain to ensure a seller note is fully on standby and subordinated to the SBA 7(a) loan?
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.
See which SBA lenders would fund your deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to approve a 7(a) like yours and flag what trips up approval.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.