SBA Loans With Seller Financing: Standby Rules & Equity Injection
Pairing an SBA 7(a) loan with seller financing is one of the most common ways to buy a small business. But SBA rules decide how much the seller can carry, when it counts toward your down payment, and when the seller can get paid.
The 10% Equity Injection
For a full change of ownership, SBA lenders generally require the buyer to bring at least 10% of the total project cost as equity. That can come from cash, gift funds, or — in part — a seller note.
When a Seller Note Counts Toward Your Down Payment
Under current SBA rules (SOP 50 10 8), a seller note can cover up to half of the required equity injection — so up to 5% of the project — if it's on full standby for the entire term of the SBA loan. That means no principal or interest payments to the seller until the SBA loan is paid off.
Because full standby for 10 years is a big ask, many sellers only agree to it for a small slice of the price.
Seller Notes That Don't Count as Equity
A seller can also carry a note that is not part of the equity injection. That note can usually be paid during the SBA loan's term, as long as the business's cash flow covers both payments. It's still subordinate to the SBA lender.
Example Structures on a $2,000,000 Purchase
- Standard: $200K buyer cash (10%) · $1.8M SBA loan · no seller note
- Standby note: $100K buyer cash (5%) · $100K seller note on full standby (5%) · $1.8M SBA loan
- Gap-filler: $200K buyer cash (10%) · $300K seller note paid monthly · $1.5M SBA loan
Other SBA Rules to Know
- The SBA lender takes first position; the seller is second
- Seller notes are reviewed by the lender and must be documented in the closing package
- Partial ownership buyouts and earn-outs follow separate rules — ask before structuring one
SBA rules change. The lender reviewing your deal has the final word on how a seller note is treated. Run the numbers in our SBA acquisition calculator — it lets you set seller financing from 0% up. See also how to structure a seller financing deal.
Figures reflect general SBA program guidelines and typical market practice. Requirements, rates, and timelines vary by lender and deal, and every loan is subject to underwriting and approval.
Related SBA guides: SBA 504 Loans Explained · SBA 7(a) vs 504 · SBA Working Capital Loans · SBA Loan Timeline · SBA Loan Denied? · Cash to Close & Fees · Rates & Prepayment · Underwriting & Guarantees
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