SBA 7(a) Q&A
Short answer
An earn-out provision for the seller cannot be financed by an SBA 7(a) loan and must be structured separately from the SBA-financed portion of the acquisition.
An earn-out, where the seller receives future payments based on the business's performance, is generally considered future consideration and cannot be included in the SBA loan amount. Any earn-out must be clearly subordinated to the SBA loan and not impact the buyer's ability to repay.
A business is purchased for $1,000,000, with an additional $200,000 earn-out payable to the seller over two years based on revenue targets. The SBA loan would finance only the $1,000,000 purchase price, and the earn-out payments would be made from the business's cash flow after SBA loan payments.
Insider move
Lenders ensure the earn-out agreement does not create additional debt service requirements that could impair the borrower's ability to repay the SBA loan. They require clear subordination of the earn-out to 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 2026-06-14. 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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