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Deal Structure Guide · Screen Printing & Embroidery

How to Structure the Purchase of a Screen Printing & Embroidery Business

From SBA financing to earnouts and seller notes — here's how deals actually get done in the decorated apparel industry.

Acquiring a screen printing or embroidery business in the $1M–$5M revenue range involves balancing buyer risk, seller expectations, and lender requirements — all shaped by the unique dynamics of a production-based, relationship-driven business. Most deals in this space are SBA-eligible and carry enterprise values between 2.5x and 4.5x SDE or EBITDA, depending on customer concentration, equipment condition, and owner dependency. Because many shops are built around the owner's personal relationships with B2B accounts — schools, corporate clients, sports leagues — deal terms frequently include transition provisions, seller notes tied to revenue retention, and earnouts designed to protect buyers if key accounts walk. Understanding the right structure for your specific acquisition target can be the difference between a business that cash-flows on Day 1 and one that quietly erodes post-close.

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SBA 7(a) Loan with Seller Note

The most common structure for screen printing and embroidery acquisitions under $5M. The buyer brings 10–15% equity down, an SBA 7(a) loan covers 75–80% of the purchase price, and the seller carries a subordinated note for 5–10% to bridge the gap. Lenders often require the seller note to be on standby during the SBA loan term.

75–80% SBA loan / 10–15% buyer equity / 5–10% seller note

Pros

  • Minimizes buyer cash outlay, preserving working capital for equipment upgrades or hiring post-close
  • Seller's carried note signals confidence in the business and aligns their incentive with a smooth transition
  • SBA loans are fully amortizing with 10-year terms, keeping monthly debt service predictable against recurring B2B revenue

Cons

  • SBA underwriting requires 3 years of clean financials — shops with mixed personal expenses or inconsistent tax returns may not qualify
  • Seller note standby provisions mean sellers receive no payment on their note for 24+ months post-close
  • SBA collateral requirements may require buyers to pledge personal assets, including home equity

Best for: Acquisitions of established shops with 3+ years of clean financials, diversified B2B accounts, and an owner willing to stay 6–12 months for transition

Full Asset Purchase with Earnout

The buyer purchases all business assets — equipment, customer list, brand, contracts, and goodwill — with a portion of the total consideration tied to post-close performance. Earnouts are typically structured around Year 1 and Year 2 gross revenue or gross profit thresholds and are common when there is meaningful customer concentration or owner-dependent account relationships.

70–85% at close / 15–30% in earnout over 12–24 months

Pros

  • Protects buyers if anchor accounts — a school district, a corporate uniform client — reduce orders after the ownership change
  • Allows sellers to capture full value if the business performs as represented, often resulting in a higher total payout than a discounted all-cash offer
  • Bridges valuation gaps when buyers and sellers disagree on trailing versus forward revenue assumptions

Cons

  • Earnout disputes are common — revenue attribution, cost allocation, and buyer operational decisions can all affect whether thresholds are hit
  • Sellers lose control post-close but remain financially exposed to buyer decisions that affect earnout performance
  • Complex to administer for a small shop without a CFO or clean accounting infrastructure

Best for: Deals where one or two clients represent 30%+ of revenue, or where the seller is the primary relationship holder for major accounts and a clean transition is uncertain

All-Cash Asset Purchase

Buyer pays 100% of the purchase price at close with no seller note or earnout. Less common in the lower middle market but attractive to sellers who want a clean exit, particularly retiring owner-operators who have no desire to remain involved post-sale.

100% at close

Pros

  • Maximum seller certainty — no post-close risk, no contingent payments, no continued involvement required
  • Fastest path to clean ownership transfer with minimal ongoing seller entanglement
  • Simplifies post-close operations — buyer has full authority with no seller financial stake in outcomes

Cons

  • Requires significant buyer liquidity or a senior lender willing to finance the full amount without seller participation
  • Buyers absorb 100% of transition risk — customer attrition, equipment failures, or key employee departures hit the buyer entirely
  • Sellers typically accept a 10–20% discount to fair market value in exchange for the certainty of an all-cash close

Best for: Acquisitions by experienced print industry operators or PE-backed platforms with access to non-SBA financing and strong post-close integration capabilities

Equity Rollover with Recapitalization

The seller retains a minority equity stake — typically 10–30% — in the business post-close while the buyer or a PE-backed platform acquires the majority. The seller 'rolls over' equity rather than cashing out entirely, participating in future upside. Most common in PE-backed roll-up strategies consolidating regional decorated apparel shops.

70–90% cash at close / 10–30% seller equity rollover

Pros

  • Seller remains financially motivated to support transition and retain key accounts during the critical 12–24 month post-close window
  • Gives sellers a second bite of the apple if the acquiring platform grows or recapitalizes at a higher multiple
  • Buyer benefits from seller's continued involvement and institutional knowledge without paying a full cash salary

Cons

  • Sellers give up full liquidity at close — if the acquiring platform underperforms, their rolled equity may be worth less than the cash alternative
  • Minority equity positions offer limited control and sellers must trust the buyer's operational and strategic decisions
  • Valuation of rolled equity and governance rights require careful legal structuring to protect seller interests

Best for: Sellers willing to stay actively involved for 2–4 years and participate in a platform growth strategy; most relevant for shops with $2M+ revenue and strong regional brand recognition

Sample Deal Structures

Retiring Owner, Diversified B2B Shop, Clean Financials

$1,800,000

SBA 7(a) loan: $1,350,000 (75%) | Buyer equity: $270,000 (15%) | Seller note: $180,000 (10%)

Seller stays on for 9 months at $6,500/month to manage key account transitions. Seller note is on 24-month standby, then amortizes over 36 months at 6% interest. No earnout given clean customer diversification — no single client exceeds 20% of revenue. Equipment was appraised at $420,000 replacement value; all assets included in purchase.

Owner-Dependent Shop, Two Anchor Clients at 45% of Revenue Combined

$1,200,000

SBA 7(a) loan: $900,000 (75%) | Buyer equity: $180,000 (15%) | Earnout: $120,000 (10%)

$1,080,000 paid at close via SBA and buyer equity. Earnout of up to $120,000 paid in two tranches: $60,000 if Year 1 gross revenue meets or exceeds $1,750,000; $60,000 if Year 2 gross revenue meets or exceeds $1,850,000. Seller remains as a commissioned sales consultant at 3% of retained anchor account revenue for 18 months. No seller note — seller preferred clean exit with earnout upside rather than a structured note.

PE-Backed Roll-Up Acquiring Regional Shop with $2.8M Revenue

$3,200,000

Senior debt (non-SBA): $2,240,000 (70%) | Platform equity: $640,000 (20%) | Seller equity rollover: $320,000 (10%)

Seller rolls 10% equity into the acquiring platform at the same implied valuation. No earnout. Seller joins platform as regional production manager for 24 months at $85,000/year. Rolled equity subject to 3-year lockup and participates in any future platform recapitalization or exit. Full asset purchase including 6 automatic presses, 12-head embroidery machines, and all customer contracts.

Negotiation Tips for Screen Printing & Embroidery Deals

  • 1Push for a detailed customer revenue schedule — broken down by account, order frequency, and average ticket — before finalizing any purchase price. A shop claiming $2M in revenue concentrated in two school district contracts is a fundamentally different risk profile than one with 80 active B2B accounts.
  • 2If the seller is the primary salesperson and account manager, tie at least a portion of total consideration to revenue retention through either a seller note with acceleration provisions or a structured earnout. This aligns the seller's financial interest with a successful transition rather than a fast exit.
  • 3Always commission an independent equipment appraisal from a decorated apparel equipment specialist before close. Automatic presses and multi-head embroidery machines depreciate unevenly and may carry deferred maintenance costs not visible on the balance sheet.
  • 4Negotiate a 6–12 month transition and training period with the seller as a core deal term — not an afterthought. Define specific deliverables: introductions to all accounts over $25,000 annually, documentation of pricing formulas, and in-person handoffs to production leads.
  • 5For SBA-financed deals, work with a lender who has prior experience closing print and manufacturing acquisitions. Equipment-heavy businesses with seasonal revenue patterns require lenders comfortable with collateral structures and cash flow normalization that general SBA lenders may push back on.
  • 6If negotiating an earnout, define revenue clearly in writing — specify whether it is gross revenue, net of returns, or net of specific cost categories — and establish who has authority over pricing decisions, new account terms, and production capacity during the earnout window to prevent disputes.

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Frequently Asked Questions

What is the typical purchase price multiple for a screen printing or embroidery business?

Most screen printing and embroidery businesses in the $1M–$5M revenue range sell for 2.5x to 4.5x SDE (Seller's Discretionary Earnings) or EBITDA. Shops at the lower end of that range typically have customer concentration issues, aging equipment, or heavy owner dependency. Shops commanding 4x+ multiples usually have diversified B2B accounts, modern equipment, trained staff who operate independently, and clean financials with gross margins above 40%.

Can I use an SBA loan to buy a screen printing or embroidery shop?

Yes — screen printing and embroidery businesses are SBA-eligible, and the SBA 7(a) loan program is the most common financing vehicle for acquisitions in this space. You'll typically need to bring 10–15% of the purchase price as a down payment, and the business must show at least 3 years of tax returns demonstrating sufficient cash flow to service the debt. Shops with inconsistent financials, undocumented add-backs, or heavy personal expenses run through the business can face SBA underwriting challenges.

Why do sellers in this industry typically carry a note, and is it always required?

Seller notes in screen printing acquisitions serve two purposes: they bridge any gap between the SBA loan amount and the purchase price, and they signal to the buyer (and the lender) that the seller has confidence the business will perform post-close. SBA lenders often require a seller note when there is meaningful owner dependency or customer concentration risk. In all-cash or PE-backed deals, seller notes are less common, but earnouts or equity rollovers often serve a similar alignment function.

What is an earnout and when does it make sense in a screen printing deal?

An earnout is a deferred payment structure where part of the purchase price is paid only if the business hits agreed revenue or profit targets after close. In screen printing acquisitions, earnouts make the most sense when the seller holds personal relationships with major accounts — a school athletic director, a corporate marketing manager — and there is genuine uncertainty about whether those accounts will stay after the ownership change. A well-structured earnout protects the buyer from paying full price for revenue that may not transfer.

How long should I expect the seller to stay involved after the acquisition?

For most screen printing and embroidery acquisitions, a 6–12 month transition period is standard and strongly advisable. During that window, the seller should introduce the buyer to all significant B2B accounts, document pricing and production processes, and support the retention of key production staff. Transition compensation is typically structured as a flat monthly consulting fee, sometimes supplemented by a commission on retained anchor accounts during the first 12–18 months.

What assets are typically included in a screen printing or embroidery acquisition?

Most deals are structured as asset purchases and include automatic screen printing presses, embroidery machines (multi-head units), DTG printers if applicable, darkroom and exposure equipment, heat presses, inventory of blanks and consumables, the customer list and order history, the business name and any brand assets, and transferable supplier relationships. Real estate is usually excluded unless the seller owns the building — most shops lease their production space, and lease assignment is a critical due diligence item.

How do I evaluate whether equipment is a risk or an asset in a screen printing acquisition?

Equipment condition is one of the most important due diligence factors in any decorated apparel acquisition. Request maintenance records and service logs for all major equipment, particularly automatic presses and embroidery machines. Have a specialist appraiser assess current market value and estimated remaining useful life. Presses older than 10–12 years with deferred maintenance can represent $150,000–$400,000 in near-term capital expenditure — costs that should be reflected in the purchase price or seller concessions.

More Screen Printing & Embroidery Guides

Acquire a Screen Printing & Embroidery Business →Valuation Guide →SBA Loan Guide →LOI Template →Due Diligence →

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