SBA 7(a) Q&A
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.
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.
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.
Insider move
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.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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