Glossary · Your money in the deal
Standby
In short
An agreement that the seller's note gets no payments until certain conditions are met. A seller note only counts toward your 10% if it's on full standby — zero payments — for the life of the loan.
What it means in a deal
Full standby is the SBA's requirement for a seller note to count as part of your equity injection: the seller agrees in writing (on Form 155) to receive zero principal or interest payments for the entire life of the SBA loan. No exceptions, no partial payments. If the deal is structured with a seller note on partial standby — where the seller receives some payments — it doesn't count toward your injection at all. Get clarity on this structure before you sign an LOI, because renegotiating after due diligence is painful.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-16. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Standby
- Can a full standby seller note accrue interest during the standby period?
- Can a partial standby seller note include a provision for interest payments during the standby period?
- Can a seller note on full standby accrue interest during the standby period, even if not paid?
- What specific language must a seller standby agreement include to ensure full standby status for 7(a) equity injection?
- Can a fully-standby seller note accrue and pay interest to the seller during the SBA 7(a) loan's standby period?
- What is the required duration of a full standby 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 2026-06-16 · 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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