Glossary · Your money in the deal
Standby seller note
In short
This is a portion of the purchase price financed by the seller, where the seller agrees not to receive payments until the SBA loan is fully repaid. It counts as part of your required equity.
What it means in a deal
A standby seller note is crucial for meeting the SBA's equity injection requirements, especially if you don't have enough cash. The SBA requires this note to be on "full standby," meaning no principal or interest payments can be made until the SBA loan is repaid. This makes the seller's financing subordinate to the bank's, reducing the bank's risk.
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 seller note
- Can a full standby seller note accrue interest during the standby period?
- What is the required duration of a full standby seller note?
- Can a partial standby seller note include a provision for interest payments during the standby period?
- Can a fully-standby seller note accrue and pay interest to the seller during the SBA 7(a) loan's standby period?
- 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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