SBA requires that sellers exit the business so that prohibits the seller from working in the business after the sale to achieve the post sale "earn out" goals. . What is it that you are hoping to accomplish by using an earnout? Are you concerned about the business value? Or is there an insufficient cash down to make the deal work? If it is about valuation, it is possible to put a (negotiated) amount into an escrow account until certain results are achieved. This is not an earnout, it is a hold-back. If the issue is about lack of enough equity/cash down, then aside from using a seller note with a standby, then you'll have to find some other source of funds (friends, family, etc.) for the equity.

A seller can not have at closing an employment agreement or consulting contract for longer than 12 months. This is one of the golden rules. Another golden rule is there can be no earnout of any kind. You can use an erosion clause on performance with a seller note if it is written well. This is much better for the buyer than an escrow as you don’t have to come up with the cash. That note can be paid out a lot faster based upon cash flow. If you don’t have 10% down, then some banks on better deals will go with 5% down with a 5% seller note on full standby, interest accrued but no payments until sba is paid in full.