Purchase Price Adjustments & SBA 7A Loans

by a searcher from New York University - Leonard N. Stern School of Business

5 years ago

Hello - has anyone had any experience in the past with incorporating purchase price adjustments into a transaction financed via an SBA 7a loan? 

In my case, we were thinking to do a holdback paid after 12 months based on a certain percentage of customers doing a certain level of business with the company next year. I've heard contrasting views from other searchers, lawyers, active SBA lenders, etc so, I'm relatively confused as to what the right answer is. I know some folks have used the seller note as a proxy to hold back against, but that's not what we're trying to do. Thanks for the help!

8 likes
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12 comments

lender from Michigan State University - The Eli Broad College of Business

SBA is weird, and you will get different answers depending on who you talk to. Lenders interpret SBA policies differently, and essentially, a bank can ultimately do whatever they want. However, earn-outs are ineligible, but forgiveness of notes are supposed to be eligible. Bank of the West does not allow adjustments to be made to the price after closing, but someone else may be ok with it.

4 years ago | like reply | 0 likes

searcher from Wake Forest University

We had something basically identical to what you proposed. You basically do a seller's note for the amount payable unless some condition isn't met, like the one you listed. Mine included a revenue component and certain employees staying on for a set period of time.

5 years ago | like reply | 0 likes

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