Full standby

Definition

A seller note that receives no payments while the SBA loan runs.

Why It Matters

It changes the seller-note negotiation materially, because a seller on full standby collects nothing for years and is betting on your success to ever be paid. That is also why the note can count toward your equity injection: the SBA treats money the seller cannot touch as if it were your own cash in the deal.

In numbers: On a $4M purchase needing a $400,000 injection, a $300,000 seller note on full standby pays the seller nothing, principal or interest, until the 7(a) is retired. It can satisfy at most 50% of the required injection, a half it shares with any other standby debt and minority investors' money. So it covers $200,000 of the injection, the buyer still brings $200,000 of cash, and the note's other $100,000 shrinks the loan.