{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-finance-a-partner-buyout-if-the-exiting-partner-also-provides-an-earn-","api_url":"https://dealroom.so/api/public/questions/can-an-sba-7-a-loan-finance-a-partner-buyout-if-the-exiting-partner-also-provides-an-earn-","question":"Can an SBA 7(a) loan finance a partner buyout if the exiting partner also provides an earn-out?","topic":"Partner Buyout & Earn-out","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, an SBA 7(a) loan can finance a partner buyout even if the exiting partner also receives an earn-out, provided the earn-out complies with SBA rules.","rule":"Earn-outs for existing owners or sellers are generally permitted in SBA acquisitions. However, the earn-out must be clearly structured, valued separately from the purchase price financed by the SBA loan, and contingent on future business performance. It cannot be guaranteed and must be subordinate to the SBA loan.","example":"You buy out your 50% partner for $400,000 using an SBA loan. Separately, the partner could receive a performance-based earn-out of up to $50,000 over two years, contingent on the business hitting specific revenue targets, as long as it's not guaranteed or funded by the SBA loan.","what_lenders_check":"Lenders ensure earn-outs do not create a disguised guaranteed payment or principal obligation that would conflict with the SBA loan's priority position. They verify the earn-out is truly contingent and not funded by the SBA loan.","required_facts":["Partner buyout","Earn-out structure","Contingency","Subordination"],"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":[],"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":"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"},{"term":"SBA 7(a) loan guaranty","url":"https://dealroom.so/glossary/sba-7-a-loan-guaranty"}],"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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-finance-a-partner-buyout-if-the-exiting-partner-also-provides-an-earn-","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."]}