Glossary · Your money in the deal
Standby Period
In short
A Standby Period is a time, typically 1-2 years, during which a seller note or other subordinated debt cannot receive principal or interest payments. This makes your equity injection look stronger.
What it means in a deal
If a portion of the seller's proceeds is structured as a seller note to meet the equity injection requirement, it must be on "full standby" for at least the first 24 months. This means no payments can be made on the note during this period, ensuring the business's cash flow prioritizes the SBA loan. Understand how any seller financing impacts your required equity injection and the business's debt service.
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 Period
- 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?
- Can a fully-standby seller note accrue and pay interest to the seller during the SBA 7(a) loan's standby period?
- Can a seller note accrue interest during the full standby period for an SBA loan?
- What if the seller wants to be paid back earlier than the SBA standby period allows?
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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