Does anyone know if SBA loans can support an earnout?
We are looking to buy a $1.5M EBITDA business for $6M. The business is experiencing some weakness due to COVID and we have agreed on an earnout structure to de-risk the deal. We would pay 60% upfront and the remaining 40% when the business returns to pre-COVID gross margins on an LTM basis. We are trying to understand if this structure can work with an SBA loan. For example, could 40% of the loan be drawn at a later time (but approved now) or could 40% of the loan proceeds be deposited in an escrow account until it is paid?
Appreciate any insights from the SBA experts on this forum.
SBA Loans and Earnouts

by an investor from University of California, Berkeley - Haas School of Business
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