Any Way of Structuring SBA Funded Deals with Contingency Payments?

by a searcher

2 years ago

I understand that SBA does not use earnout as part of a deal structure and usually only allow seller notes. Are there any creative ways of building performance based contingency payments into an SBA deal structure such that they do not violate SBA's requirements?

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7 comments

lender from The University of Chicago - Booth School of Business

Agree with all; under SBA parameters, reduceable/forgivable seller notes are one of the few permissible contingencies. The measurement parameter needs to be something the target has already attained (e.g. revenues, earnings, customers, etc.). Hence, if the parameter falls (not increases), the purchase price is effectively reduced. Hope this helps.

2 years ago | like reply | 0 likes

lender from California State University, Sacramento - College of Business Administration

Clawbacks in seller notes are allowable. Can be tied to historic earnings or revenues….even customers and employees transitioning. Escrow holdbacks also a good way to mitigate transition risk.

2 years ago | like reply | 2 likes

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