Does anyone have any experience financing earnouts 1 & 2 years post-close?

searcher profile

May 01, 2024

by a searcher from Harvard University - Harvard Business School in Miami, FL, USA

Looking to structure financing for a deal with a revenue based earnout component for the seller payable 1-year and 2-years post close. Ideally would embed earnout structure within financing at closing with earnout portion funded when needed.

Would love to chat about how people have done this type of structuring.


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commentor profile
Reply by a professional
from Southern Methodist University in Garland, TX, USA
I agree with Jason. If your earnout is so large that your cash flows generated cannot cover it, I would question the size of the earnout negotiated (unless your initial consideration paid is so low, you are essentially having the buyer wait to be paid which is unlikely).

That being said, you might consider a delayed draw term loan. Happy to talk through further.
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Reply by a lender
from University of Missouri in Denver, CO, USA
Earnouts are not allowed with SBA, but buyer rebates are which is essentially the same idea but the ultimate benefit(s) can only go to the buyer. If you'd like to discuss further you can reach me here or redacted
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