Employeement Agreement Examples for SBA Deals?

professional profile

October 29, 2023

by a professional from University of North Carolina at Chapel Hill in Atlanta, GA, USA

Does anyone have any examples of employment agreements post-close with a seller that they can share? Or can anyone provide guidance on how those are typically structured (the key points, not all the legal terms)?

Also, in one deal that I am looking at, they have one customer worth 30% of revenue that is coming up for renewal within a few months of potential closing. The seller is hesitant to do a forgivable seller's note since that is tied to revenue and other things besides the renewal could impact that revenue number. Is it permissible under the SBA to have an employment agreement with the seller that is only one year long but includes a rather hefty 'bonus' upon the successful completion of the renewal with this customer?

Here is what I'm in general thinking for the employment agreement post-close. Any thoughts would be appreciated!
- 3 months, full-time and paid fixed salary as a full-time employee
- Occasional access for up to one year, mostly just for advising and general questions (would this be paid hourly?)
- Bonus upon successful completion of key customer renewal
- Strong Sales Commission for any new business generated for certain lines of the business

My hope is that this structure can best align incentives and risks, but again, any feedback would be appreciated. redacted

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Whenever you have a bonus in the employment contract on an SBA loan many lenders and the SBA will see it as additional compensation on the transaction, which is not allowed under the SBA rules. I would be happy to jump on a call and discussion some potential options we have used to help get other clients around this issue. You can reach me here or directly at redacted
commentor profile
Reply by a searcher
in New York, NY, USA
Hi, Daniel. On the 30% customer -- why not just tie the seller note to that customer renewing? If they don't renew, note forgiven. Personally I wouldn't accept anything that did not tie a substantial amount of the transaction's value into that renewal and highly incentivize the seller to make that renewal a priority.
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