SBA Form 155: Standby Creditor's Agreement

Who completes it

A creditor, such as a seller, who agrees to wait while the SBA loan is repaid. Lenders may use an equivalent form (SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.2.b).

When it is used

Before or at disbursement, if the loan terms require it (Sec. B, Ch. 6, Para. D.5).

What it asks

• A loan grid: SBA loan number and name, standby creditor, standby borrower and lender.
• What the borrower owes the creditor in principal and interest, with a copy of the standby note attached.
• One payment choice: none, interest only, principal and interest unless the lender says stop, or principal and interest from a set date (para. 1).
• Promises to turn over payments received in violation within 15 days and to take no collection action until the SBA loan is satisfied (paras. 2 to 4).
• A promise to sign documents subordinating any liens that secure the standby loan (para. 5).
• The creditor's signature, binding successors, assignees and later loans unless the lender agrees otherwise (paras. 7 and 8).

A filled-in example

This example is made up. Sample Bakery LLC, the people, the lender and every figure are fictional, and the ID numbers are zeros. It shows what finished entries look like, using the form's own field names.

An example only. Use your own facts on the real form, and check that your copy is the edition named above.

Common mistakes

• Choosing a box that allows payments, then counting the note as equity (Appendix 15, Para. C.2.a). The debt needs full standby for the term of the 7(a) loan, with no payments of principal or interest.
• Leaving out the note. A copy must be attached to the standby agreement (Sec. B, Ch. 1, Para. C.2.b).
• Keeping lien rights ahead of the lender. The standby creditor must subordinate any lien rights in the loan's collateral (Sec. B, Ch. 1, Para. C.2.b).
• Accepting a payment anyway. Anything received in violation goes to the lender within 15 days (Form 155, para. 2).
• Assuming accrued interest is lost. Standby debt may accrue interest, then be added and amortized after the 7(a) loan is paid in full (Sec. B, Ch. 1, Para. C.2.b).
• Taking equity too. In a change of ownership, the standby debt provider may not take an equity investment in the business (Appendix 15, Para. C.2.a).
• Counting too much standby debt (Appendix 15, Para. C.2.a). In a change of ownership, seller debt, standby debt and minority equity can supply no more than half of the required equity injection.