SBA deal for 51%

October 04, 2025

by a searcher from University of Mississippi in Chattanooga, TN, USA

Hi folks, has anyone done a deal recently for 51% of a company where the founder stays on a maintains the 49%? I'm trying to think through the best way to structure it such that the founder is incentivized by a liquidity event in the future (the timing of which they wouldn't have full control over) and works with SBA. I think normally this owner would prefer an earn-out so that they have some timing predictability, but not sure the best way to structure that in an SBA-friendly manner. I would, of course, prefer they retain the equity.

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Reply by a professional
in Windermere, FL 34786, USA

I’ve seen this question come up a few times, so here’s my two cents. Allowing a founder to roll equity in an SBA deal technically means they’d have to personally guarantee the debt. That’s a huge ask, and in practice it’s very rare. We’ve seen a couple of sellers do it, but only when the buyer was extremely sophisticated and the seller truly believed in them. Even then, it’s the extreme minority of cases, it’s just very tough to get a seller comfortable with that. On the earn-out side, SBA doesn’t allow them in the traditional sense where the seller gets upside tied to performance. You can get creative with some preferred notes or a forgivable contingent note structure (we actually have a guide on that I’ll link here). But the classic “earn-out” that a seller would normally prefer isn’t SBA-eligible. So while there’s always a path forward with almost any deal, trying to structure it with the seller holding 49% equity and making it SBA-friendly is going to be very challenging in today’s environment. https://masterclass.thesmbcenter.com/p/quick-guide-on-forgivable-notes-now

Reply by a searcher
from University of Alabama in New York, NY, USA

Yeah issue is the PG they’ll have to sign for, even if they roll 1% per the June SOP changes. I think the only exception to that would be someone maintaining their same ownership stake which is less than 20%, ie a minority partner rolling their 10% stake (no change in % and <20% means 2 year PG required). Seller notes with forgiveness can work mechanically similar to an earnout, nuance being it has to be based on historical performance (not future growth), BUT things get hairy depending on the exact role you may try to keep the owner in - has to be non controlling, non managerial, etc. I think a sales commission based role could address what you need but that still doesn’t cover the rollover you’re looking for. May simply not be viable for you with SBA

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