Glossary · Your money in the deal
Seller standby note
In short
A loan from the seller to the buyer, structured to be repaid only after the primary SBA loan. This arrangement helps bridge financing gaps and can reduce your required cash injection, making a deal more accessible.
What it means in a deal
For an SBA 7(a) loan, any seller note must be on 'full standby,' meaning no payments (principal or interest) can be made until the SBA loan is repaid in full. This strengthens the business's cash flow for servicing the SBA debt and is a key component of your equity injection calculation.
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 standby note
- Can a full standby seller note accrue interest during the standby period?
- What is the required duration of a full standby seller note?
- Can a partial standby seller note include a provision for interest payments during the standby period?
- Can a fully-standby seller note accrue and pay interest to the seller during the SBA 7(a) loan's standby period?
- Is a seller's personal guaranty required for providing a standby note?
- Can a standby seller note accrue or pay interest during the 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.
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