{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-i-use-an-sba-7-a-loan-to-finance-the-purchase-of-a-business-where-part-of-the-purchase","api_url":"https://dealroom.so/api/public/questions/can-i-use-an-sba-7-a-loan-to-finance-the-purchase-of-a-business-where-part-of-the-purchase","question":"Can I use an SBA 7(a) loan to finance the purchase of a business where part of the purchase price is an earn-out?","topic":"Goodwill financing","audience":"borrower","bot_mode":"buyer","short_answer":"No, an SBA 7(a) loan cannot finance the earn-out portion of a business acquisition's purchase price.","rule":"Earn-outs, which are contingent payments made by the buyer to the seller based on the future performance of the acquired business, are not eligible for SBA financing. The SBA loan can only cover the fixed, agreed-upon purchase price. The earn-out must be structured as a separate agreement and typically requires subordination to the SBA loan.","example":"A business is being acquired for $1,000,000, consisting of a $900,000 upfront payment and a $100,000 earn-out payable if certain revenue targets are met. The SBA 7(a) loan can only finance the $900,000 portion (subject to equity injection). The $100,000 earn-out must be paid by the buyer from future cash flow and be fully subordinated.","what_lenders_check":"Lenders need to clearly delineate the fixed purchase price from any contingent earn-out payments. They will ensure the earn-out is explicitly excluded from the SBA loan amount and that its terms (including subordination) do not jeopardize the SBA loan repayment.","required_facts":["Earn-out financing","Ineligible for SBA loan","Contingent payments","Fixed purchase price","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":[{"question":"Is it possible to finance a business with an SBA 7(a) loan where most of its value is intangible assets like customer lists and brand reputation?","url":"https://dealroom.so/sba-7a/questions/is-it-possible-to-finance-a-business-with-an-sba-7-a-loan-where-most-of-its-value-is-intan"},{"question":"How does the SBA assess the value of \"blue sky\" or intangible assets when underwriting a business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-assess-the-value-of-blue-sky-or-intangible-assets-when-underwriting-a-bus"},{"question":"What percentage of a $1 million business acquisition can be financed by an SBA 7(a) loan if a significant portion is goodwill?","url":"https://dealroom.so/sba-7a/questions/what-percentage-of-a-1-million-business-acquisition-can-be-financed-by-an-sba-7-a-loan-if-"},{"question":"Is a separate business valuation required for an SBA 7(a) acquisition loan?","url":"https://dealroom.so/sba-7a/questions/is-a-separate-business-valuation-required-for-an-sba-7-a-acquisition-loan"},{"question":"Does financing a substantial amount of goodwill increase the required collateral for an SBA loan?","url":"https://dealroom.so/sba-7a/questions/does-financing-a-substantial-amount-of-goodwill-increase-the-required-collateral-for-an-sb"},{"question":"How do lenders determine the value of goodwill during the appraisal process for an SBA acquisition loan?","url":"https://dealroom.so/sba-7a/questions/how-do-lenders-determine-the-value-of-goodwill-during-the-appraisal-process-for-an-sba-acq"}],"related_terms":[{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"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"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"},{"term":"Lease with an option to purchase","url":"https://dealroom.so/glossary/lease-with-an-option-to-purchase"}],"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-i-use-an-sba-7-a-loan-to-finance-the-purchase-of-a-business-where-part-of-the-purchase","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."]}