Glossary · The loan itself
Interest-Only Payments
In short
This is a period where your loan payments cover only the interest, not the principal. It can provide a temporary cash flow boost early in your business ownership.
What it means in a deal
The SBA 7(a) program allows for an initial interest-only period, typically up to 24 months, on certain loans. This can be beneficial for businesses needing to build working capital or manage early operational costs post-acquisition. Discuss with your lender if this option is available and makes sense for your cash flow projections.
Official sources
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 Interest-Only Payments
- Can an SBA 7(a) loan be approved if the seller's note allows interest-only payments for the first year?
- What happens if the seller's note is only partially on standby, with some payments allowed?
- If a seller note is structured with deferred principal payments but immediate interest payments, does it still qualify as full standby?
- Can a partial standby seller note include a provision for interest payments during the standby period?
- Can the seller receive interest payments on a fully subordinated seller note during the SBA loan term?
- Can a seller note with deferred payments but no interest count as full standby for equity injection?
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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