Glossary · Doing the deal
Seller Note Subordination Agreement(Standby Agreement)
In short
A legally binding document where the seller agrees that their financing (seller note) will be paid back only after the SBA 7(a) loan is fully satisfied. This is a standard SBA requirement for seller financing.
What it means in a deal
If a seller note is part of your deal, the SBA will require a Seller Note Subordination Agreement, also known as a Standby Agreement, making the seller's debt "full standby." This means the seller cannot receive any payments on their note until the SBA loan is repaid, ensuring the SBA lender has first claim on the business's cash flow. It functions as part of your equity injection.
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 Subordination Agreement
- What specific language is required in a seller note subordination agreement for SBA 7(a) loan approval?
- What specific language is required in a seller note's subordination agreement to ensure it counts as full standby equity?
- If I use a seller note as part of my equity, what are the specific subordination terms required?
- What are the lien subordination requirements for a seller note on full standby in a 7(a) acquisition?
- What documentation is specifically required for a lender to demonstrate proper subordination of a seller note on full standby?
- Can a seller's post-closing consulting agreement influence the standby status of their 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.
Line up financing while you're under LOI
Tell us the business, the price, and your timeline — we'll match you with lenders who close deals like yours and flag anything that stalls the process.
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.