SBA LOANS AND EARNOUTS

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.



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