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The seller note on full standby

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Quick Answer

A seller note counts toward the SBA equity injection only on full standby for the life of the loan, capped at half the required injection.1

What it is

SOP 50 10 Version 8 permits seller debt to count toward the required injection only where it is on full standby for the life of the SBA loan and does not exceed half of the required equity injection — which works out to at most five percent of project cost. Full standby means no principal and no interest for the entire term, documented on the lender's standby agreement.1

Operational context

What good looks like

Why It Matters

It is a capital rule with a people consequence nobody writes about. A seller on full standby receives nothing at closing beyond the financed portion and will receive nothing for years, which removes their cash reason to be useful during exactly the window when an inherited business is most fragile. If your seller has gone quiet in month two, look at the structure before you look at the personality.1

Common mistakes

Related Questions

What do I do if the seller undermines me after closing?

Check the financing structure before you read it as a personality problem: if the seller note is on full standby, the seller is receiving nothing and will receive nothing for years.

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Frequently Asked Questions

What is The seller note on full standby in venture capital?

SOP 50 10 Version 8 permits seller debt to count toward the required injection only where it is on full standby for the life of the SBA loan and does not exceed half of the required equity injection — which works out to at most five percent of project cost.

Why is The seller note on full standby important for startups?

Understanding The seller note on full standby is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.A1-06 — SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)Gov / statistical primary(A seller note counts toward the SBA equity injection only on full standby for the life of the loan, capped at half the required injection.)primary · A1 · operating-compliance · rule

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