While I understand you can’t have a direct earnout arrangement with an SBA loan, I'm curious about alternative structures that effectively mimic an earnout. I've come across a few creative approaches:
1) Implementing a conditional consulting agreement. If the business achieves a certain goal (like hitting a GP target) within the first 12 months, the previous owner is engaged as a consultant at a predetermined rate for the following year.
2) Crafting a conditional seller financing clause where a portion of the seller financing is forgiven/wiped out if the business fails to meet certain benchmarks in the first year.
I would love to hear what other approaches have been successfully employed in this context.
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