New Seller Note Requirements for SBA 7(a) Loans
7113731563 • August 4, 2025
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🏦 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.
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: Rank Industry Why It’s Popular for Women Entrepreneurs 1. Health Care & Social Assistance Recession-proof, purpose-driven, and growing fast. 2. Professional, Scientific & Technical Services Consulting, legal, marketing, design, tech services 3. Administrative & Waste Management Services Virtual assistance, janitorial, staffing, HR support 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 Property management, 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.
Top 5 Uses for Working Capital from SBA 7(a) Loans 1. Payroll and Labor Costs Cover wages for all workers—full‑time, part‑time, temporary, or 1099. Essential when cash flow lags or you hire seasonally. 2. Operating Expenses Fund marketing campaigns, subscriptions, software, insurance, licenses, day‑to‑day costs. These are short‑term needs that keep your business running. . 3. Inventory Purchases Buy inventory needed to meet demand. Technically separate from operating working capital, SBA allows dedicated purchase lines for inventory to keep your shelves stocked. 4. Rent and Utilities Use the proceeds to pay rent or lease payments and utility bills (electricity, phone, internet). Keeps doors open while you scale. 5. Seasonal or Transaction‑Based Needs With the SBA 7(a) Working Capital Pilot or CAPLine, you can handle seasonal spikes, contract financing, and export orders. You can borrow against receivables or inventory and access funds tied to specific transactions. Why These Uses Matter - Keeps you operational when sales are slow or erratic. - Gives flexibility to fund both planned growth and unexpected cash demands. - Improves cash flow, bridging gaps between invoicing and payment. For Consideration SBA counts payroll, rent, utilities, day-to-day costs as “working capital”. Inventory and equipment are separate budget items I Final Thoughts Using working capital from SBA 7(a) loans helps you stay agile. It supports payroll, keeps up with rent and utilities, lets you buy inventory, fund marketing, and scale into new markets or seasons when revenue isn’t consistent.
Understanding Small Balance SBA 7(a) Loans: What Are Your Options?
Small business owners don’t always need $5 million. Sometimes, the right number is $50,000, $150,000, or $350,000. That’s where small balance SBA 7(a) loans come in—a streamlined, powerful way to access capital without the red tape of traditional financing.
At ComCap, we specialize in helping business owners secure these fast, flexible SBA loans—especially when speed, simplicity, or lower credit scores are part of the equation. Here’s a breakdown of the different types of small balance SBA 7(a) loans available today: 1. SBA Express Loans (Up to $350,000)
✅ Fastest Turnaround in the SBA program ✅ Pre-screened by lenders, not SBA (only a partial SBA guarantee ✅ Often funded in 15 days or less
Best for: Working capital, debt consolidation, equipment, or short-term expansion.
Pro Tip: These are the go-to choice for small business owners who need funding fast, and credit scores as low as 600 may qualify with the right revenue or collateral. 2. SBA 7(a) Small Loans (Up to $350,000)
✅ More flexible underwriting than traditional 7(a) ✅ Requires less documentation than full-sized loans ✅ Still gets the SBA’s full guarantee review
Best for: Startups with strong projections, early-stage businesses, or growing firms that don’t need a full million.
Note: The SBA recently removed the requirement for formal debt service coverage, which opens the door for revenue-based approvals even if the net income is negative. 3. Community Advantage Loans (Up to $350,000) (Note: Only available through designated mission-based lenders)
✅ Designed for underserved or disadvantaged markets ✅ Includes technical assistance and mentoring ✅ Lower credit thresholds in some cases
Best for: New businesses, women-owned, minority-owned, or veteran-owned enterprises—especially in low-income areas.
Watch out: This program is phasing out in favor of enhanced SBA 7(a) flexibility, but certain lenders still offer it in 2025. 4. SBA 7(a) Working Capital Loans (Customized to $50K–$350K) ✅ Tailored to business cash flow and gross revenue ✅ Often structured as term loans or revolving lines of credit ✅ Easier closing with limited documentation
Best for: Businesses that need to smooth seasonal dips, buy inventory, or build short-term reserves.
ComCap Insider Tip: These are often revenue-based, meaning you can still qualify with break-even or even slightly negative net income. 5. SBA Lines of Credit (Express LOCs, CAPLines, etc.)
✅ SBA Express LOCs go up to $350,000 ✅ Seasonal, Contract, and Builder’s Lines available ✅ Great for recurring capital needs or contractors
Best for: Contractors, service businesses, and companies with cyclical income that need short-term cash injections. Why Small Balance SBA 7(a) Loans Work
* Lower credit score requirements (some lenders go down to 600) * Minimal or no collateral sometimes acceptable * Monthly payments and long terms (up to 10 years) * Government guarantee reduces lender risk Ready to Apply? ComCap Can Help!
We help small business owners who were told “no” elsewhere. Whether your income is negative, your time is short, or your credit is less than perfect—we find creative ways to get SBA 7(a) funding done.
✅ Approvals based on gross revenue ✅ Loans closed in as little as 15 days ✅ Personal support throughout the process Let’s get your SBA loan done right.
Contact us today or start your pre-approval online at www.comcapventure.com. Tags: #SBAloans #SmallBusinessFunding #WorkingCapital #SBAExpress #ComCap
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