The two get framed as either/or, but the workhorse deal combines them: an SBA 7(a) loan as the primary debt, with a seller note covering part of the required equity injection. Since June 2025, that note only counts toward your down payment on full standby — zero payments — for the loan’s entire life.
| Dimension | SBA 7(a) loan | Seller financing |
|---|---|---|
| Typical share of the price | The bulk of the purchase price — capped at $5M per loan, $10M combined with a 504 loan as of July 2026 | Appears in roughly half of small-business sales; when used, covers 10%–60% of the price |
| Cost and rate structure | Prime plus a capped lender spread — roughly 10.5%–14.75% currently; amortizes up to 10 years (25 with real estate), no balloon | Negotiated directly with the seller — principal, rate, and standby period are whatever the two of you agree to |
| Who bears the risk | The bank, backed by an SBA guaranty (85% of the first $150K, 75% above); you personally guarantee the loan | The seller, in second position behind the bank — can be partially or fully wiped out if the deal fails |
| How it gets approved | Formal underwriting: DSCR must clear 1.15x (1.10x on loans under $350K) after your market-rate salary is subtracted | No formal test — the seller agrees to it or doesn’t. Willingness to carry a note signals confidence in the business |
| Combining the two (post-June-2025 rule) | Requires a 10%-of-project-cost equity injection; at least half must be your own real, non-borrowed cash | Counts toward that 10% only on full standby — zero payments — for the loan’s entire life, capped at half the injection |
All of this assumes you already have a price to finance. Getting from a seller’s asking price to a defensible offer is its own step — DealStratum’s guide to business valuation covers the multiple before you ever get to structuring how to pay it.
The structure behind most small acquisitions looks the same everywhere you look: roughly 10% of the purchase price as buyer equity, an SBA 7(a) loan covering the bulk of the price, and a seller note bridging whatever’s left. Nothing forces you to use all three — plenty of SBA 7(a) loans close with zero seller financing — but this combination shows up constantly, because a seller note solves two problems the SBA loan can’t solve alone: it lowers how much you have to borrow from the bank, which directly helps your DSCR, and it can cover part of your required equity injection when you don’t have the full amount sitting in cash.
Here’s the part that trips people up post-June-2025. A seller note only counts toward your required equity injection if it’s on full standby — the seller collects no principal and no interest — for the entire life of the SBA loan. The old structure, where a seller could start collecting interest after 24 months, is gone. And even a fully compliant standby note can only cover half of the required injection, roughly 5% of total project cost. The other 5% has to be your own real, non-borrowed money, no matter how generous the seller note is.
Here’s what that looks like on a deal near this site’s own median: a $450,000 business, roughly $160,000–$180,000 in annual SDE at a typical 2.5–2.8x multiple. Add working capital, closing costs, and the SBA guaranty fee — call it $50,000 — and the total project cost your injection is measured against comes to $500,000, not the $450,000 price. That’s the SBA 7(a) piece: the loan covers the bulk of the $450,000 purchase price, while the required 10%-of-project-cost injection works out to $50,000 on the larger $500,000 figure.
Now the seller-financing piece. If the seller will carry a note on full standby — zero principal, zero interest, for the entire 10-year life of the loan — it can offset up to half that injection: $25,000 on this deal, which drops your real-cash floor to $25,000. Few sellers will agree to a decade of full standby, though, so the realistic plan is to budget the whole $50,000 in your own cash and treat a standby note as a bonus that frees some of it up, not as something you count on going in. DealStratum’s full cash-to-close math walks this same $450,000 deal — plus $1M and $2M versions — line by line.
It’s also worth being precise about what a seller note is not: an earnout. A seller note is a fixed debt paid back on a schedule, with the purchase price locked at closing. An earnout ties part of the price to the business’s future performance, and earnouts are banned outright on SBA 7(a) deals — a seller-financing conversation that drifts toward “we’ll true up the price based on next year’s revenue” will sink your application before it starts.
If you can fund the full 10% equity injection yourself in real cash, you don’t need a seller note to get an SBA 7(a) approved. A seller note becomes the more common path when you’re short on cash, when the seller wants to signal confidence in the handoff, or when trimming how much you borrow from the bank is the difference between a DSCR that clears the 1.15x floor and one that doesn’t. Run your own numbers before you find out which camp you’re in — DealStratum’s SBA and DSCR calculator models the equity injection, the seller-note cap, and your debt service together.
No. A seller note can cover at most half of the required 10%-of-project-cost equity injection — roughly 5% — and only if it’s on full standby, meaning no principal and no interest, for the entire life of the SBA loan. At least 5% of project cost has to be your own real, non-borrowed cash regardless of how the seller note is structured.
It’s gone. Before the SBA’s June 1, 2025 rulebook (SOP 50 10 8), a seller note on partial standby — where the seller could start collecting interest after 24 months — could count toward your equity injection. That structure was deleted. A note only counts now if it’s on full standby for the whole term of the SBA loan, with the seller collecting nothing until then.
No, and mixing them up can sink an SBA application. A seller note is a fixed debt paid back on a set schedule, with the purchase price locked at closing. An earnout makes part of the price variable based on the business’s future performance — and earnouts are banned outright on SBA 7(a) deals.
Mostly it’s a confidence signal. A seller who carries a note — especially on full standby, waiting years to get paid — is betting on the same future cash flow you are, from a position behind your bank loan. A seller who won’t carry any note on an otherwise healthy business is worth asking about.
No — that number gets repeated everywhere, but it isn’t in the SBA’s rulebook. The actual regulatory floor is 1.15x on a standard 7(a) loan and 1.10x on small loans under $350,000. 1.25x is a lender overlay: some banks choose to underwrite more conservatively than the SBA requires, with requirements ranging anywhere from 1.15x to 1.50x depending on the lender and industry.
On a typical $450,000 acquisition, total project cost — the purchase price plus working capital, closing costs, and the SBA guaranty fee — runs around $500,000, which puts the minimum equity injection at $50,000. A full-standby seller note can offset at most half of that: $25,000. So the real-cash floor is $25,000 if the seller agrees to full standby, and the full $50,000 if they won’t. Since most sellers won’t agree to a decade of zero payments, plan around the $50,000 figure and treat anything less as a bonus.
Because the SBA’s 10% minimum applies to everything being financed, not just what the seller gets paid. Total project cost adds working capital and closing costs — including the SBA guaranty fee — on top of the purchase price. On a $450,000 deal, for example, roughly $50,000 of working capital and closing costs pushes total project cost to $500,000, so the $50,000 injection is 10% of $500,000, not of the $450,000 price. Budgeting off the sticker price alone is how buyers show up short at closing.
DealStratum screens a deal’s cash flow against SBA underwriting before you spend 60 days applying to a lender who was never going to fund it.