Standby creditor agreement

Definition

The seller's signed acceptance of no payments for a set period.

Why It Matters

It is how a seller note fills part of the required equity injection: the lending rules, not the parties' preference, set the standby terms, commonly no payments for the life of the SBA loan. A seller who signs one is effectively financing part of your down payment and betting on your success to ever be repaid.

In numbers: On a $4M deal, a $400,000 seller note counted toward the 10% injection takes no payments at all while it is on standby, which on most SBA acquisition loans means 24 months.