Glossary · Your money in the deal
Standby Requirement
In short
A condition where a seller note or other debt owed to the seller is subordinated to the SBA loan, meaning the seller cannot receive payments until the SBA loan is repaid.
What it means in a deal
If a seller note is part of your equity injection, the SBA will likely require it to be on "full standby." This means the seller cannot be paid principal or interest until the SBA loan is fully satisfied. This strengthens the lender's position and demonstrates your commitment to the business.
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 Requirement
- What are the specific requirements for a seller note to qualify as full standby equity?
- Is "insurable interest" always a legal requirement for obtaining business life insurance?
- Is profitability a strict requirement for getting an SBA 7(a) loan?
- Is a blanket lien on all business assets a standard SBA requirement?
- What are the specific standby requirements for a seller note to count towards my equity injection?
- What are the specific SBA requirements for a seller's note to be on full standby?
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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