SBA SOPS RE: Partial Buy-in / PGs / Earn-outs
June 07, 2023
by a lender from California State University, Sacramento - College of Business Administration in Seattle, WA, USA
With a Partial change of ownership (PCO) (also called partial buy-in) the seller can stay on for longer than a year in any type of role deemed appropriate. If the seller owns 20% or more AND/OR is KEY! they'll be required to personally GTY.
For 100% buy-out, SBA rule is business as usual in that the seller has only up to 12-months to remain in the company in a transition or consulting role.
SBA has not changed the stance on EARNOUTS.....they are not eligible for SBA.
Regarding compensation for the seller on a go forward basis if they are staying on long-term in the case of a partial change of ownership/Partial buy-in, the DSC calculation needs to include their ongoing compensation.