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 terms: no payments of principal or interest for the life of the SBA loan, and no more than half of the injection. 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 project, a $200,000 seller note on full standby can count for half of the $400,000 injection. Since mid-2025 full standby has meant no payments for the life of the SBA loan, where the rule before it asked for 24 months.