Glossary · Your money in the deal
Seller note on standby
In short
This is a portion of the seller financing that is not paid back until the SBA loan is fully repaid, or only paid back with strict limitations. It's often required by the SBA to count towards your equity injection.
What it means in a deal
For an SBA 7(a) loan, any seller note used to bridge the gap between your cash injection and the loan amount must typically be on "full standby" for the life of the loan. This means no principal or interest payments are made on it until the SBA loan is paid off, making it function like equity in the eyes of the SBA. A "partial standby" might allow interest-only payments.
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 Seller note on standby
- Can a seller note be partially on standby and partially paid out?
- What is a standby seller note on an SBA 7(a) loan?
- If a seller note is on full standby, when can the seller start receiving principal payments?
- Can a seller note on full standby accrue interest during the standby period, even if not paid?
- Can a seller note on partial standby count towards the required equity injection?
- Under what conditions can a seller note on full standby be repaid early?
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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