New Seller Note Requirements for SBA 7(a) Loans
7113731563 • August 4, 2025
This is a subtitle for your new post
🏦 New SBA Seller‑Note Rules: What’s Changed as of June 1, 2025
1. Seller Notes Can Only Cover Up to 50% of Required Equity Injection
- To qualify toward the 10% total equity injection, a seller note must now be capped at 50% of that requirement (i.e. max of 5% of project cost).
2. Full Standby Is Required for the Entire Loan Term
- The seller note must remain on
full standby—meaning
no principal or interest payments can be made until the SBA 7(a) loan is fully repaid (Either 10 or 25 year terms). Interest may accrue, but no payments are permitted.
- This replaces the prior 24‑month standby requirement.
3. Subordination & Documentation
- The seller note must be subordinate to the SBA loan and structured to avoid payments if the borrower defaults.
- Documentation typically includes an SBA Form 155 (Standby Agreement) or equivalent.
4. Guarantee Obligations in Partial Ownership Scenarios
- If the seller retains less than 20% ownership post‑closing, they must personally guarantee the SBA loan for at least two years, even if their note is on standby.
Why This Matters for Buyers & Sellers
⚠️ Impact on Deal Structure
- Sellers who agree to finance almost half of the equity but receive no payments for a decade or may refuse to accept these terms.
- Buyers using seller notes as part of their equity need real cash or other acceptable equity sources (e.g. documented personal funds, grants, rollover equity—if allowed).
✅ Seller Notes Are Still a Tool — But a More Restrictive One
- Seller notes remain viable for buyers with limited upfront cash—but only up to half of the injection and with significant deferral risk for the seller.
🚧 Sellers / Owners Who Stay Assume Risk
- Any seller retention of equity triggers personal guarantees, making rollover equity significantly less common or attractive.
Tips to Structure Seller Notes Under the New SOP
- Do the math early: Calculate whether the seller note portion will be within the 50% limit of required equity.
- Negotiate standby terms: Sellers must agree to no payments until the SBA loan is repaid—explicitly document in Form 155.
- Keep equity docs ready: Ensure all non-seller‑note equity (e.g. cash, personal funds, other sources) is well‑documented with bank statements, gift‑agreements, capital roll‑onto statements, etc.
- Anticipate seller reluctance: If a seller hesitates at a 10‑year delay, consider alternative equity like conventional debt or higher buyer cash.
- Avoid rollover unless structured as stock sale: Sellers retaining equity must comply with personal guarantees and co‑borrower status rules.
Under SOP 50 10 8, effective
June 1, 2025, the SBA significantly tightened its stance on seller‑financed equity:
- Seller notes are allowed, but limited to
half of the required equity injection.
- To qualify, they must remain on
full standby throughout the SBA loan term.
- Sellers retaining any equity face
personal guarantee requirements, adding complexity to rollover deals.
If you're structuring an SBA 7(a) acquisition or refinancing, make sure your financial model reflects these constraints—and consult your lender, broker, or SBA attorney early to align on structure and documentation.
Need help evaluating whether a seller note makes sense in your deal? Please reach out today.
Why an SBA Express Line of Credit Might Be Your Best Move Need faster access to funds without sacrificing flexibility? The SBA Express Line of Credit combines the low-cost, reliable backing of the SBA with the agility small businesses crave. Here’s what sets it apart: 1. Super-Fast Response Times Unlike traditional loans, the SBA Express generally offers a 72-hour SBA decision on whether to guarantee your line of credit—so you can get going almost immediately. 2. Flexible, Revolving Access It's not a one-and-done loan. You draw only what you need, repay, then borrow again—like a credit card but with lower rates and smarter terms. 3. Competitive SBA Backing SBA guarantees up to 50% of the line, lowering risk for lenders and improving your chances. You benefit without sacrificing speed. 4. Use It for Whatever Keeps You Rolling Need to manage cash flow, cover payroll, buy inventory, or respond to emergencies? It’s your cushion. Just don’t use it for ineligible costs like real estate or debt refinancing. 5. Pay Interest Only on What You Use Unused portion? No interest. You only pay when you draw. 6. Potential Fee Advantage Some lenders waive fees on the Express Line—making it even more cost-effective compared to term loans. What to Watch For Maximum Line Size : Typically up to $350,000—enough for many small business needs, but not every big project. Interest Matters : Rates vary; always compare. Use Restrictions : Strictly business—no personal spending, real estate or investment purchases. Lender Discretion : The SBA sets the rules, but each bank interprets them. Ask specifically about their SLA (Service Level Agreement) and timeline. Renewal Terms : Some lenders may require annual renewal or fee. Why You Should Care If cash flow moves fast in your business, waiting weeks for a term loan can cost you. The SBA Express Line gives you business-grade funding on your terms—quickly, flexibly, and affordably.
Running a hair, nail, or lash salon isn’t just about delivering great service. It’s also about managing the constant challenges that come with owning a small business. From seasonal slowdowns to rising costs, many salon owners face cash flow gaps that can put their business at risk. That’s where working capital from an SBA 7(a) loan can make a difference. Common Problems Salons Face 1. Seasonal Fluctuations Many salons see a spike in revenue during holidays and wedding season, but slower months can strain cash flow. 2. Rising Supply Costs Hair color, nail polish, lash extensions — the cost of professional products keeps climbing, eating into margins. 3. Equipment Upgrades Chairs, dryers, manicure tables, and lash beds eventually need replacing. Without cash on hand, upgrades get delayed. 4. Staffing Challenges Keeping top stylists, nail techs, and lash artists often means offering competitive pay and benefits, which can be tough during slower periods. 5. Marketing & Client Retention Attracting new clients and keeping loyal ones takes consistent marketing — something many salons put off when funds are tight. How SBA 7(a) Working Capital Can Help The SBA 7(a) loan program offers salon owners affordable financing with flexible repayment terms. Working capital from an SBA loan can be used to: Cover payroll during slow months Buy supplies in bulk to save money Upgrade or replace equipment without draining savings Invest in advertising to bring in more clients Fund staff training to improve services and retention Because SBA loans offer longer repayment terms and lower rates than most alternatives, salon owners can manage cash flow without the pressure of short-term, high-interest debt. Bottom line: Whether you run a hair salon, nail spa, or lash lounge, having working capital ready can mean the difference between struggling through slow months or growing year-round. 📞 Contact ComCap today to see how an SBA 7(a) loan can help your salon thrive.
Sofia Sefchick sits in her yoga studio and apparel store, Hello Yoga, in Reno, NV. Photo courtesy of Noticiero Movil. Women-owned businesses are growing faster than any other segment of the U.S. economy. As of 2024, women own more than 13 million businesses , generating $2 trillion in annual revenue and employing over 9 million people. Whether you’re launching or expanding, SBA loans are often a critical component for growth, especially when traditional lenders hesitate. If you’re a woman entrepreneur, or you're advising one, this list will show where the momentum is and where smart capital can make a difference. Top 10 Industries for Women Owned Businesses These are the most common and fastest-growing industries where women are launching and scaling businesses: 1. Health Care & Social Assistance Recession-proof, purpose-driven, growing. 2. Professional, Scientific, Technical Services Consulting, legal, marketing, design, tech 3. Administrative & Waste Management Virtual assistance, janitorial, staffing, HR 4. Retail Trade (Online & Physical) E-commerce boom, low startup costs, scalable 5. Accommodation & Food Services Restaurants, bakeries, catering, hospitality 6. Educational Services Tutoring, coaching, online courses, childcare 7. Real Estate, Rental & Leasing Prop managers, brokerages, short-term rentals 8. Finance & Insurance Bookkeeping, tax prep, financial planning 9. Arts, Entertainment & Recreation Creative services, wellness, fitness studios 10. Manufacturing (Small Batch & Niche) Beauty products, apparel, artisan goods B reakdown by Ethnicity Black Women Owned Businesses Fastest growth rate of any demographic. Popular industries: Hair and beauty Health and wellness Retail and e-commerce Childcare and education Many rely on personal funding or community capital. SBA microloans and Express lines of credit are often critical for launching or restocking inventory. Latina Owned Businesses Represent 1 in 10 women owned businesses in the U.S. Common sectors: Food service (catering, food trucks) Cleaning services Retail and clothing brands Professional services (translation, legal aid, consulting) SBA loans can help secure vehicles, equipment, or real estate for expansion. Asian American Women Owned Businesses High representation in: Healthcare and medicine (clinics, therapy, wellness) Education services E-commerce and specialty retail Technology and SaaS startups Many qualify for SBA 7(a) and 504 loans to fund offices, tech, and staffing. Native American Women Owned Businesses Strong presence in: Artisan manufacturing Agriculture Cultural education and tourism Environmental consulting Often located in rural areas where Community Advantage loans and 504 rural development loans are ideal options. How SBA Loans Power Women Owned Businesses Most women-owned businesses are under capitalized, not because of lack of vision, but because of systemic lending gaps. Here’s where SBA loans help level the playing field: SBA Loan Type Best Use Case 7(a) Working capital, business acquisition, expansion 504 Equipment, real estate, construction Express Fast working capital or startup needs Microloans New ventures, solopreneurs, small inventories These loans offer lower down payments, longer terms , and in many cases, no collateral required . That’s a game-changer if you’re trying to get started or scale quickly. Final Thoughts Women are redefining what business ownership looks like across every industry. But growth still requires funding, and that's where SBA loans come in. Whether you're running a childcare center, launching a wellness brand, or acquiring a second location, the right financing helps you move faster, hire sooner, and grow smarter. At ComCap, we help women owned businesses access SBA funding — even when traditional banks say no or don't lend enough. ✅ SBA 7(a), Express, and 504 Loans ✅ Available nights, weekends, and holidays ✅ We move fast and can closing in 10 days Need help funding your next step? Let’s talk.
Share On: