2-Year Lockup Period for Seller Notes in SBA Loans

searcher profile

April 30, 2023

by a searcher from University of South Carolina in Indianapolis, IN, USA

Is the SBA still enforcing a 2-year lockup period for payments on seller notes after closing? When I purchased a business a few years back, this was a requirement. However, I've recently heard that the rules have changed, but I'm unable to locate any official documents or confirmations to support this.

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I concur with the points already made. It is not an SBA rule that the loan is on standby. Some lenders have requirements that are more stringent than the SBA requirements. Others have requirements that are deal specific based on their comfort level. And in some cases different note terms are negotiated between the buyer and seller based on their own preferences. If you want to go through the options available on sellers notes, I am always more than happy to jump on a call. You can reach me here or directly at redacted
commentor profile
Reply by a lender
from University of North Carolina at Wilmington in Argyle, WI 53504, USA
If you're wanting to use the seller note for equity it now needs to be on full standby for the life of the loan. Else, repayment can begin right away but it must be subordinate to the SBA loan.
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