{"ok":true,"canonical_url":"https://dealroom.so/glossary/moral-hazard","api_url":"https://dealroom.so/api/public/glossary/moral-hazard","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"moral-hazard","term":"Moral Hazard","group":"Reading the business","definition":"A situation where one party takes on more risk because another party bears the cost of that risk. It can appear when a seller's incentives change post-sale.","what_it_means":"In an acquisition, moral hazard could arise if an earnout structure isn't aligned with long-term business health, incentivizing short-term gains at the expense of future value. Structure deal terms like earnouts and seller notes carefully to ensure the seller remains invested in the business's success and doesn't cut corners after closing.","url":"https://dealroom.so/glossary/moral-hazard","official_sources":[],"related":[{"slug":"earnout","term":"Earnout","url":"https://dealroom.so/glossary/earnout"},{"slug":"seller-note","term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"slug":"non-compete","term":"Non-compete","url":"https://dealroom.so/glossary/non-compete"},{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"}],"related_questions":[{"question":"What environmental due diligence is required for real estate collateral located in a flood hazard area for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-environmental-due-diligence-is-required-for-real-estate-collateral-located-in-a-flood"},{"question":"What additional environmental due diligence is required for a 7(a) loan if the business handles hazardous materials?","url":"https://dealroom.so/for-lenders/questions/what-additional-environmental-due-diligence-is-required-for-a-7-a-loan-if-the-business-han"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Moral Hazard","url":"https://dealroom.so/glossary/moral-hazard","source_type":"DealRoom Data"}}