Yes, but only up to half of it, and only on full standby. As of October 2026, under SBA SOP 50 10 8.1, a seller note counts toward the 10% equity injection only if the seller receives no principal and no interest for the life of the SBA loan, and standby notes, other standby debt and passive minority investors together can supply no more than half of the required injection. On a $2.5 million project, the injection is $250,000 and the seller note can cover at most $125,000; the other $125,000 must come from other sources, usually the buyer's cash.
Full standby means the seller is paid nothing on the note, neither principal nor interest, for as long as the SBA loan is outstanding. The business portion of an acquisition loan amortizes over a maximum of 10 years. So a full-standby note can mean a seller waits up to 10 years for the first payment, unless the SBA loan is paid off sooner.
A note that pays anything during the SBA loan is not on full standby. It does not count toward the injection. The lender includes its payments in debt service coverage, at a maximum 10-year amortization.
Ask your lender two questions about any standby note: whether interest may accrue during standby, and how and when the note can be paid after.
Example 1: seller note only
Example 2: seller note plus passive investors
The cap is shared. Every dollar from small passive investors is a dollar the seller note cannot cover. Investors whose money counts toward the injection also generally receive only tax distributions until the SBA loan is repaid.
Most sellers want cash. In the IBBA Market Pulse for Q2 2026, sellers received 83% to 92% of deal value in cash at closing, and seller financing was under 10% of deal value. Where listings offer seller financing at all, which is 20.4% of US listings, the median stated note is 30% of the price at 7% over 3 years. A seller expecting payments over 3 years is being asked to wait up to 10 with nothing paid.
The seller also sits behind the bank. If the business fails, the SBA lender is repaid first. A standby note is the most junior money in the deal except your own equity.
What can make it acceptable to a seller:
A regular note is allowed. It just stops counting as equity and starts counting as debt.
You can use both: a small full-standby note toward the injection and a regular note that the cash flow can carry. Get the lender to approve the structure before you put it in the letter of intent.
If your purchase is a Business Expansion, the lender may reduce or waive the injection when you show strong liquidity and positive net worth. Then a standby note matters less, and a regular note may serve the seller better. Coverage for a Business Expansion is tested at 1.15x.
Where these numbers come from: Standby, limited-source, and coverage rules are from SBA SOP 50 10 8.1 as summarized by Beancount, FunderIntel, Cantrell Law and Starfield & Smith. Cash-at-close data is from the IBBA Market Pulse Q2 2026. Listing terms are from BigIdeasDB. Confirm current terms with an SBA lender. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).
No. As of October 2026, limited sources, including a full-standby seller note, can supply no more than half of the 10% injection. The rest must come from other sources.
No. Only a note on full standby, with no principal or interest paid for the life of the SBA loan, counts. A note with any payments is included in debt service coverage instead.
Yes, but they share one cap: together they cover at most half the injection. See Can investors fund my down payment, and what do I give up?
Once the injection is set, the bank decides how much it will lend against the business's cash flow: How much will a bank lend to buy a business? The buyers who end up with the most valuable companies decide what the business goes into before they buy it, because a seller who waits years for payment may prefer a stake in something larger.
Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.
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Meraki Dealmakers is a service of Meraki Partners, LLC.
Meraki Partners, LLC is an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm, and does not solicit investors or receive compensation based on capital raised.
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