{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-7-a-loan-program-handle-an-acquisition-where-part-of-the-purchase-price-i","api_url":"https://dealroom.so/api/public/questions/how-does-the-sba-7-a-loan-program-handle-an-acquisition-where-part-of-the-purchase-price-i","question":"How does the SBA 7(a) loan program handle an acquisition where part of the purchase price is an earn-out?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Earn-outs are generally acceptable in SBA 7(a) acquisitions, but they must be subordinate to the SBA loan and meet specific standby requirements.","rule":"An earn-out, which is a portion of the purchase price contingent on future business performance, is considered a form of seller financing. It must be on full standby, meaning no payments are made to the seller until the SBA loan is fully repaid. This ensures the earn-out does not interfere with the business's ability to service the SBA debt.","example":"A buyer acquires a business for $1,000,000, with $800,000 financed by an SBA loan and $200,000 as an earn-out based on future profits. This $200,000 earn-out would need to be on full standby, with no payments until the SBA loan is satisfied.","what_lenders_check":"Lenders are concerned about the impact of any seller financing on the business's cash flow and the SBA loan's repayment priority. They will ensure the earn-out terms are fully subordinate and structured not to jeopardize the SBA loan.","required_facts":["Earn-out","Purchase price component","Seller financing","Full standby","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":"If a seller takes a fully subordinated note, can they remain an employee or consultant after acquisition?","url":"https://dealroom.so/sba-7a/questions/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte"},{"question":"For a $900,000 business acquisition, what percentage of the total required equity injection can come from a fully subordinated seller note?","url":"https://dealroom.so/sba-7a/questions/for-a-900-000-business-acquisition-what-percentage-of-the-total-required-equity-injection-"},{"question":"Can a seller who takes a fully subordinated note also remain an employee or consultant of the business after the acquisition?","url":"https://dealroom.so/sba-7a/questions/can-a-seller-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-"},{"question":"How does an earn-out provision affect an SBA 7(a) loan for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-does-an-earn-out-provision-affect-an-sba-7-a-loan-for-a-business-acquisition"},{"question":"What is the minimum term duration a seller note must be on full standby for an SBA loan?","url":"https://dealroom.so/sba-7a/questions/what-is-the-minimum-term-duration-a-seller-note-must-be-on-full-standby-for-an-sba-loan"},{"question":"Can interest be accrued and paid on a seller note while it is on full standby?","url":"https://dealroom.so/sba-7a/questions/can-interest-be-accrued-and-paid-on-a-seller-note-while-it-is-on-full-standby"}],"related_terms":[{"term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"},{"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 guaranty","url":"https://dealroom.so/glossary/sba-7-a-loan-guaranty"},{"term":"Standard 7(a) loan","url":"https://dealroom.so/glossary/standard-7-a-loan"}],"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/how-does-the-sba-7-a-loan-program-handle-an-acquisition-where-part-of-the-purchase-price-i","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."]}