{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-fund-a-partner-buyout-with-an-earn-out-provision","api_url":"https://dealroom.so/api/public/questions/can-an-sba-7-a-loan-be-used-to-fund-a-partner-buyout-with-an-earn-out-provision","question":"Can an SBA 7(a) loan be used to fund a partner buyout with an earn-out provision?","topic":"Partner buyouts","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, an SBA 7(a) loan can finance the initial buyout, but the earn-out provision itself cannot be financed by the SBA loan and must be subordinate.","rule":"For a partner buyout, the SBA 7(a) loan covers the established purchase price of the departing partner's share. Any earn-out (future payments based on performance) must be clearly separate from the SBA loan, fully subordinated to it, and not create additional debt service that impacts the SBA loan repayment.","example":"A partner buyout values the exiting partner's share at $500,000, which the SBA loan funds. An additional $100,000 earn-out, contingent on future profit targets, would be a separate agreement between the partners, payable only after SBA loan payments are met.","what_lenders_check":"Lenders will review the earn-out agreement to ensure it is subordinate to the SBA loan and does not jeopardize the remaining partner's ability to repay. They confirm the earn-out is not part of the SBA loan proceeds.","required_facts":["Partner buyout","Earn-out separate","Subordinate to SBA","No SBA funding","Repayment impact"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"If I'm buying out a partner, does the remaining partner also need to personally guarantee the SBA loan for $500,000?","url":"https://dealroom.so/sba-7a/questions/if-i-m-buying-out-a-partner-does-the-remaining-partner-also-need-to-personally-guarantee-t"},{"question":"If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-does-the-sba-require-the-business-to-pass-a-cash-flow-test-po"},{"question":"If I am buying out a partner, how does the SBA ensure the purchase price is fair and justifiable?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-how-does-the-sba-ensure-the-purchase-price-is-fair-and-justif"},{"question":"Can an SBA 7(a) loan be used to purchase a business if the seller will retain a minority ownership stake?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-purchase-a-business-if-the-seller-will-retain-a-minority-ow"},{"question":"What are the requirements for the seller in an SBA 7(a) business acquisition loan?","url":"https://dealroom.so/sba-7a/questions/what-are-the-requirements-for-the-seller-in-an-sba-7-a-business-acquisition-loan"},{"question":"What is the importance of a non-compete agreement from the seller in an SBA 7(a) acquisition?","url":"https://dealroom.so/sba-7a/questions/what-is-the-importance-of-a-non-compete-agreement-from-the-seller-in-an-sba-7-a-acquisitio"}],"related_terms":[{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"Partner buyout","url":"https://dealroom.so/glossary/partner-buyout"},{"term":"Lease with an option to purchase","url":"https://dealroom.so/glossary/lease-with-an-option-to-purchase"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-fund-a-partner-buyout-with-an-earn-out-provision","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}