Glossary · The loan itself
Standby Provisions
In short
Specific clauses within a seller note or other debt agreements that ensure the SBA loan takes priority for repayment. They restrict payments on other debt until the SBA loan is adequately serviced.
What it means in a deal
These provisions are critical for any seller financing or other debt in your deal. The SBA mandates that any standby debt cannot be paid, including interest, for at least two years (full standby) or only interest (partial standby), ensuring your cash flow prioritizes the 7(a) loan. Review these with your attorney.
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 Provisions
- What if a franchise agreement contains provisions for indemnification that concern the SBA?
- How does the SBA evaluate a franchise agreement not on the directory for acceptable franchisor control provisions?
- What specific provisions in a franchise agreement, if present, would render a franchise ineligible for 7(a) financing?
- How does a lender determine if a franchise agreement contains impermissible control provisions not listed on the Directory?
- Which specific provisions in a franchise agreement raise red flags for undue franchisor control, making it ineligible for a 7(a) loan?
- Can a full standby seller note accrue interest during the standby period?
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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