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