A gift of equity is an arrangement in which the seller credits a portion of the sale price as the buyer's equity, lowering the cash the buyer must bring to close. On SBA acquisitions, a seller note on full standby serves a similar purpose, counting toward the required equity injection.
Worked example
| Line | Amount |
|---|---|
| Purchase price | $1,000,000 |
| SBA required equity injection (10%) | $100,000 |
| Seller note on full standby (counts as half) | $50,000 |
| Buyer cash needed | $50,000 |
SBA rules allow a seller note on full standby for the loan term to satisfy up to half of the 10% injection, cutting the buyer's cash in half.
Why it matters when buying a business
Seller-funded equity is one of the most powerful levers for a cash-light buyer. A true equity injection substitute must be a standby note meeting SBA terms, a casual "price cut" doesn't qualify. Confirm the structure with your lender before you count on it.
