Glossary · The loan itself
Standby Note
In short
A type of seller financing where the seller agrees to defer repayment of their loan until the SBA loan is fully satisfied or certain conditions are met. It's essentially 'subordinated' to the SBA loan.
What it means in a deal
This is common when the seller provides financing to bridge a gap in your equity injection or project costs. The SBA requires specific language in the standby agreement to ensure the seller's note doesn't interfere with your ability to repay the SBA loan. Expect strict terms, including no payments for at least two years.
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 Note
- 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 is the required duration of a full standby seller note?
- 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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