Glossary · People and paperwork
Earnout
In short
Part of the price paid later, only if the business hits agreed targets. Note: earnouts are not allowed in SBA 7(a) deals — use a seller note instead.
What it means in a deal
An earnout bridges the gap between what a seller thinks the business is worth and what a buyer is willing to pay today. If the business hits performance targets after closing, the buyer pays the seller an additional amount. The catch for SBA deals: the SBA prohibits earnout structures in 7(a) transactions because the contingent payment is uncertain. If you're buying with SBA financing and the seller wants upside participation, restructure it as a seller note with defined terms instead.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-16. Official sources control — verify before relying on any rule for a live deal.
Related terms
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-16 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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