This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
A common Florida deal pattern looks like this: a services company — call it a commercial landscaping business in the Tampa suburbs — goes to market at $2.8 million. The buyer isn’t a private equity fund. It’s an individual with a resume, a pre-qualification letter from an SBA lender, and about $300,000 of savings. The letter of intent gets signed with a $2.4 million headline price plus a $400,000 earnout tied to customer retention. Then the lender’s credit team reads the LOI and sends back a short list of problems: the earnout can’t exist, the seller note has to be restructured, and the equity math doesn’t work. Nobody lied to anybody. The deal just collided with the document that actually governs main-street M&A in this country — the SBA’s standard operating procedure.
The SOP is the real purchase agreement
Below roughly $5 million of purchase price, the marginal buyer for most Florida businesses is an SBA 7(a) borrower. That’s the loan program’s statutory ceiling, and it means the terms of the program set the terms of the market. Since June 1, 2025, the governing text has been SOP 50 10 8, the most significant rewrite of SBA lending rules in years — and a deliberate reversal of the looser 2023-era rules that had made SBA acquisitions look almost like little leveraged buyouts. If you’re selling a business in this price band, the SOP constrains what your buyer can pay and how the consideration can be structured, whether or not you’ve ever read it. Treating it as the buyer’s problem is how sellers end up renegotiating in week eight, from a position of exhaustion, the deal they thought they signed in week one — the exact leverage decay I described in the post on why Florida LOIs aren’t binding anyway.
The equity injection math got harder, and seller notes got colder
Start with the down payment. On a complete change of ownership, SOP 50 10 8 requires an equity injection of at least 10 percent of total project costs — a floor, not a guideline, with the borrower’s cash sources now exhaustively enumerated. The days of creative gap-filling are over: the SBA wants unborrowed cash, retirement rollovers, documented gifts, and not much else.
Here’s the part that lands on sellers. Under the prior SOP, a seller note could satisfy a meaningful chunk of the buyer’s equity requirement if it sat on standby for just twenty-four months. Under SOP 50 10 8, a seller note counts toward the injection only if it covers no more than half of it — and only if it’s on full standby for the entire term of the SBA loan. No principal. No interest payments. For a standard ten-year 7(a) note, that means the seller who “helps the buyer with the down payment” is agreeing to wait a decade for the first dollar on that piece of paper, sitting behind a lender with a lien on everything. A seller note outside the equity stack can still amortize normally, but the portion doing equity duty is functionally an escrow with a maturity date. Any Florida founder offered that structure should price it accordingly — and think hard about collateral and guaranties, because as I covered in the piece on homestead and personal guaranties behind seller notes, the practical recovery path on defaulted seller paper in this state runs through exemptions that favor the debtor.
Earnouts are banned, so price certainty is mandatory
Now the structural rule that surprises everyone who comes to main street from the middle market: SBA rules prohibit earnouts in 7(a) change-of-ownership financings. The purchase price has to be fixed and fully determined at closing. There is no “we’ll bridge the valuation gap with a contingent payment” in an SBA deal — the standard tool for resolving a seller who believes the hockey-stick projections and a buyer who doesn’t simply does not exist here.
That constraint reorganizes the negotiation in three predictable ways. First, diligence gets heavier on the front end, because the buyer can’t de-risk optimistic projections through contingent pricing; the quality-of-earnings report becomes the whole ballgame, and retrades happen there rather than through earnout mechanics. Second, the parties reach for adjacent structures — consulting agreements, employment agreements, transition compensation for the seller. Those are permissible when they’re real and priced at fair market value, but a “consulting agreement” that walks and talks like a disguised earnout invites exactly the scrutiny you’d expect from a federally guaranteed lender, and lenders have seen every version of it. Third, even conventional purchase price adjustments need the lender inside the tent early. A working capital true-up that can move cash after closing sits uneasily next to a rule requiring the price to be determined at closing, and different credit shops draw that line in different places. The time to find out where your lender draws it is before exclusivity, not after.
Guaranties, rollovers, and the partial-buyout alternative
Two more features complete the picture. Anyone owning 20 percent or more of the borrower generally must give a full personal guaranty — which is why SBA buyers cluster at 19.9 percent when they syndicate equity from friends and family, and why the seller’s spouse may be asked to sign more paperwork than the seller expects. And since 2023, the program has allowed partial changes of ownership: a seller can stay on the cap table while the buyer’s entity borrows to purchase a majority stake. SOP 50 10 8 kept that door open but attached consequences — a seller who retains equity can expect to guarantee the loan for a period after closing, which converts “I kept 20 percent for the upside” into “I kept 20 percent and co-signed the debt.” A founder weighing that trade should read it alongside the securities-law mechanics I walked through in the post on rollover equity and seller notes under Florida’s securities exemptions, because the rollover conversation and the guaranty conversation are really one conversation about how much seller risk survives the closing.
Sell to the financing, not just to the buyer
None of this makes SBA buyers bad buyers. In the sub-$5 million Florida market they’re often the only buyers at a full price, and the program exists precisely to put ownership within reach of operators who’d never clear a conventional credit committee. But a seller who understands the SOP negotiates differently. The asking price gets sanity-checked against a 10 percent injection and the buyer’s actual liquidity. The LOI names the structure — fixed price, no earnout — so nobody wastes six weeks on a term the lender will strike. The seller note, if there is one, gets priced like the long-dated subordinated instrument it now is. And the whole timeline builds in the lender’s underwriting, appraisal, and SBA authorization, which is measured in months, not weeks. The deals that close smoothly in this market aren’t the ones with the cleverest structures. They’re the ones where both sides read the same rulebook before they started writing.
If you are planning to buy or sell a Florida business with SBA financing in the capital stack, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
