Yes, partially. A seller note can count toward the required 10% equity injection on an SBA acquisition if it is on full standby for the life of the loan, is no more than 50% of the injection, and is documented on SBA Form 155. On a $1,000,000 deal, up to $50,000 of the $100,000 injection can be a standby seller note, leaving as little as $50,000 of your own cash. If the seller won't put the note on full standby, it can't count toward the injection.
How it works in the capital stack
| Source | Amount | Notes |
|---|---|---|
| SBA 7(a) bank loan | $900,000 | Up to 10-yr term |
| Your cash injection | $50,000 | At least half the 10% must be equity |
| Seller note (full standby) | $50,000 | Counts toward injection · SBA Form 155 |
| Total injection | $100,000 | 10% of price |
Read the deeper mechanics in seller notes on full standby and down payment & equity injection.
What "full standby" means
Full standby means the seller receives no principal and no interest for the entire life of the SBA loan. Because the note has no payments, it adds nothing to your debt service, which is exactly why the SBA lets it count toward equity and why it improves your DSCR.
A standby note is the seller betting on you, no payments until the bank is made whole.
Seller financing beyond the down payment
Seller notes don't have to be limited to the injection. A larger seller note can fund part of the price alongside the SBA loan. But a note that isn't on full standby carries payments that count as debt service and pull down your DSCR, so structure matters. See how it fits in seller financing with an SBA loan.
See how a standby note changes your deal
Model the injection, the payment, and the coverage ratio.
Frequently asked questions
Partially. It counts toward the 10% injection if it's on full standby for the life of the loan, is no more than 50% of the injection, and is on SBA Form 155. On a $1M deal, up to $50,000 of the $100,000 injection can be a standby note.
The seller receives no principal and no interest for the entire life of the SBA loan. With no payments, it doesn't add to debt service, which is why the SBA allows it to count toward the equity injection.
Yes. Non-standby seller notes can fund part of the price alongside the SBA loan, but those payments count as debt service and affect DSCR. A larger standby note improves coverage because it carries no payments during the loan.
