Glossary
Standby agreement
A written agreement that a subordinate lender - usually a seller - will take no payments while the SBA loan is outstanding.
Full standby means no principal and no interest for the life of the SBA loan, which can be ten years. It is the condition under which a seller note counts toward the equity injection.
Sellers frequently agree to hold paper and then decline once they understand what standby means. Raising it at the letter-of-intent stage saves deals.
See also
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