Glossary · Your money in the deal
Standby agreement
In short
A formal agreement where a lender or seller defers payments on a debt, allowing the SBA loan to take priority. It's crucial for meeting SBA equity injection requirements without impacting the business's immediate cash flow.
What it means in a deal
If you're injecting seller financing or other debt that counts towards your equity, a standby agreement is often required by the SBA. It ensures that the business prioritizes paying the SBA loan before other specified debts, making your financing eligible as equity. Make sure the terms are clear and align with SBA rules, especially regarding repayment timing.
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 Standby agreement
- What are the specific conditions for an acceptable full standby agreement?
- What specific language must a seller standby agreement include to ensure full standby status for 7(a) equity injection?
- What specific language must a non-SBA third-party standby agreement include to ensure eligibility?
- What specific language must a full standby agreement contain to be acceptable to the SBA?
- Can a seller's post-closing consulting agreement influence the standby status of their seller note?
- Can the 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.
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