For SBA lenders
Short answer
Earn-out provisions are generally not considered part of the initial purchase price for 7(a) loan sizing but can be factored into cash flow projections if structured as a deferred, contingent seller payment.
SOP 50 10 specifies that the purchase price financed by a 7(a) loan must be for a definite, ascertainable amount at closing. Earn-outs, being contingent and future payments, typically cannot be financed by the SBA loan. However, the potential future earn-out payments should be considered in the business's projected cash flow for debt service coverage analysis.
A $1,000,000 business acquisition includes a $100,000 earn-out payable over two years based on future revenue. The 7(a) loan finances the $1,000,000 base purchase price, and the earn-out is treated as a future contingent liability in the cash flow projections.
Insider move
Lenders must ensure that earn-outs are clearly structured as contingent payments, not financed by the SBA loan, and do not impair the business's ability to service the SBA debt. Mischaracterizing an earn-out can lead to a guaranty denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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