A standby note (full standby) is a seller note that makes no principal or interest payments for the entire life of the SBA loan. Because it adds nothing to annual debt service, up to half of your 10% equity injection can be a standby seller note under SBA rules, documented on SBA Form 155.
How it fills the down payment
| Source | Amount |
|---|---|
| Your cash | $50,000 |
| Seller note (full standby) | $50,000 |
| Total 10% injection | $100,000 |
| SBA 7(a) bank loan | $900,000 |
The standby note can be no more than 50% of the injection, so $50,000 is the max here.
Why it matters when buying a business
A standby note does double duty: it cuts the cash you need at close and, because it carries no payments, it improves your DSCR. It also keeps the seller invested in your success. Get the standby terms right on the note and Form 155, or the lender won't credit it toward your injection.
