The rule in brief
| Source | SBA SOP 50 10 8.1, Appendix 15 (7(a) Changes of Ownership), effective October 1, 2026 |
|---|---|
| Threshold | Business purchase price of $3 million or more: the contract price less the appraised value of any owner-occupied real estate, measured before buyer equity, seller financing, or other funding |
| Covered | Initial Acquisitions and Business Expansions |
| Not covered | Owner Buyouts (including partial changes of ownership), ESOPs, and cooperatives |
| Applies to | Applications received by SBA on or after October 1, 2026 |
| Whose report | The lender must obtain it, and it must be conducted for the lender’s benefit. A report already prepared for the buyer may be used if it comes with a reliance letter or a secondary review by a different firm. A report prepared by or for the seller can’t be used |
| Who prepares it | An independent, experienced financial professional. No specific credential is named |
| What it must include | A reconciliation of the accountant-prepared financials, tax returns, internal financials, and IRS transcripts to normalized earnings; a cash proof covering the trailing twelve months and the prior two fiscal years; documentation of every adjustment; and an assessment of how sustainable revenue and margins are after the sale. If the business has operated for less than two years, the cash proof covers all years in operation |
| How it’s used | The lender must use the QofE earnings in its debt service coverage test and keep the report in the credit file |
| Who pays | The cost can be passed to the borrower and counts toward the required equity injection |
Summarized from SOP 50 10 8.1 (Appendix 15) and its technical updates (SBA Information Notice 5000-882227, September 25, 2026). This is general information, not legal or lending advice. Lenders can read the SOP differently, so confirm the details with yours.
What it means for buyers
1. The QofE number sets your loan
The lender must use the QofE’s earnings in its debt service coverage test, not the seller’s or the broker’s adjusted EBITDA. If the QofE lands below the seller’s number, the loan shrinks, and the gap has to be filled with more equity, standby seller financing, or a lower price.
2. Get it engaged early
The earlier a material finding surfaces, the more options you still have. A finding the week before closing forces a bad choice. The same finding three weeks earlier leaves room to renegotiate, restructure, or walk before most of the fee and calendar are spent. Get the QofE underway as soon as the term sheet is accepted, not after underwriting has started, and confirm with your lender how it will be engaged or relied on so it qualifies.
3. Budget for it
On deals at or above $3 million, a QofE is a required closing cost, not an option. Because it counts toward your equity injection, it isn’t necessarily new cash, but it does need to be scoped and timed to support underwriting.
4. Your SDE won’t be the number
If you priced the deal on seller’s discretionary earnings, expect the QofE’s adjusted EBITDA to be lower. Here’s why that matters for coverage.
What it means for sellers
If your buyer is using an SBA loan with a business purchase price of $3 million or more, an independent QofE of your business is coming, and its number decides how much the buyer can borrow. Sellers with clean, accrual-based books tend to come through well. Cash-basis books with generous personal adjustments often don’t.
A sell-side QofE won’t replace the lender’s, but it finds the issues while you still have time to fix or explain them, instead of having them surface in the lender’s report and trigger a price renegotiation.
For lenders
We work with lenders to set up each engagement so it meets the SOP, including how the lender engages or relies on the report. Our scope covers each element the SOP requires, plus normalized working capital and debt and debt-like items. Every engagement includes an independent technical review by an advisor with Big 4 M&A due diligence experience, and typical turnaround is three to five weeks from engagement and full document access.
Email Patrick for our lender scope of services, or to be added as a QofE resource ahead of your next deal.
Frequently asked questions
Can I use the seller's QofE?
Not to satisfy the SBA requirement. The QofE may not be prepared by or for the seller. A sell-side QofE still helps: it surfaces issues early and gives the lender's QofE provider a head start.
Can I use a QofE I ordered as the buyer?
Possibly. SBA's technical update allows a QofE already prepared for the buyer to be used if it comes with a reliance letter or a secondary review by a different firm. Confirm with your lender before you order one, so it's set up to qualify and you don't pay for the same work twice.
Who pays for it?
The lender orders it, but the cost can be passed through to the borrower. That cost counts toward the borrower's required equity injection.
Does the person preparing it need a specific credential?
The SOP requires an independent, experienced financial professional, but does not name a credential. That differs from the business valuation, which must come from a Qualified Source holding one of five specific accreditations.
My deal is under $3 million. Do I still need one?
The SBA doesn't require one below $3 million, but your lender may, and the reasons to do one don't go away.
New to Quality of Earnings? Read our plain-English QofE guide.
Working on an SBA deal?
Talk through the numbers before the lender’s QofE does.