Creative ways of doing SBA compliant Earn Outs (without calling them so)

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by a searcher from Harvard University - Harvard Business School
in Austin, TX, USA

1yr ago

Creative ways of doing SBA compliant Earn Outs (without calling them so)

SBA 7a doesn't allow performance based payouts (earn outs) as part of the loan structure. Given many business that we see have huge volatility, I was wondering if any one have done earn outs without calling them that way and still have gotten their deal structure compatible with SBA 7a?
Maybe a side agreement? Happy to hear your thoughts.

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reply by a lender 1yr ago
from University of Missouri in Denver, CO, USA

Yes, in SBA you can do a forgivable note, the key is it can only benefit the buyer. I would be happy to talk this over further, I have seen deals structured this way.

reply by an intermediary 1yr ago
in Campbell, CA, USA

I just spoke with one of our go to the SBA lenders. If I were you, I would make sure the "creative" solutions that are being suggested here don't amount to bank fraud.