Are seller earnouts allowed in an SBA business purchase?
Short answer
No. SOP 50 10 8.1 prohibits seller earnouts on 7(a) changes of ownership. Buyer rebates based on business performance are allowed, and rebate cash must pay down the 7(a) loan. Source: App. 15, Para. A.
No. SOP 50 10 8.1, Appendix 15, Para. A, states that seller earnouts are prohibited on 7(a) changes of ownership.
What is allowed
Buyer rebates based on business performance are allowed, because they benefit the borrower.
Rebate funds you receive from the seller must go to the principal balance of the 7(a) loan that funded the sale. That required paydown does not trigger a subsidy recoupment fee (13 CFR § 120.223).
Working capital true-ups are different
A working capitalMoney for day-to-day costs such as payroll, rent and inventory. Full definition adjustment in the purchase agreement is not a rebate, because it remedies a lack of working capital at acquisition. Cash you receive under a true-up may stay in the business. It does not have to pay down the loan. SBA Information Notice 5000-882227, dated September 25, 2026, describes the same treatment.
Alternatives for a price gap
A seller note on full standby can bridge a price gap, and it can count as equity within limits. A seller note with payments must fit within the valuation cap and debt service coverageCash available for loan payments, divided by those payments. Above 1 means the cash covers them. Full definition.
What the SOP leaves open
The SOP does not define "earnout." Have counsel and your lender review any contingent price term before you sign.
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