SBA 7(a) Q&A
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.
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.
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.
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.
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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