Money & Financing

SBA + Seller Financing Explained

Yes, and it's one of the most common structures in small-business deals.

Practical Explanation

SBA rules allow a seller note to count toward part of the buyer's equity injection, provided the note is on full standby (no principal or interest payments) for at least the first 24 months. Up to half of the required 10% injection can be a standby seller note, lowering the buyer's cash-to-close dramatically.

Real-World Example

A $600,000 deal: SBA lends 90% ($540,000), the seller carries $30,000 on full standby, and the buyer brings $30,000 cash. Effective cash-to-close: 5%.

Typical cash required

As low as 5% of purchase price when properly structured.

Experience required

Same as standard SBA: industry/management background preferred.

Advantages

✓Lowest cash-to-close legally available
✓Seller stays in the deal as a financial stakeholder
✓Easier qualification than 10% pure cash

Risks

!Standby terms are strict — payments cannot resume early
!Seller note typically requires balloon at end of standby
!More moving parts in underwriting

Frequently Asked Questions

Does every lender allow this?

Most SBA preferred lenders do, but always confirm structure with the lender before signing an LOI.

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