Starting October 1, 2026, the SBA is changing how it underwrites larger acquisition loans, and the change runs through an independent Quality of Earnings (QoE) report, not just a credit memo.
Under SOP 50 10 8.1, any SBA 7(a) loan financing an initial business acquisition or expansion at a purchase price of $3 million or more now requires a lender-engaged QoE. That threshold is measured as contract price less owner-occupied real estate at appraised value, calculated before equity, seller debt, or any other financing source, so it can't be structured around. Owner buyouts and ESOP conversions are exempt.
The requirement is specific about the lender who orders the report. A QoE commissioned by the buyer, seller, or broker doesn't satisfy the SOP, even if it's a strong report. The lender engages it once the loan number issues, and the resulting earnings, are what has to drive the debt service coverage calculation. The lender then retains the report in the loan file.
The report itself has to cover a cash-proof reconciling of bank statements to the income statement and tax returns across the trailing twelve months and each of the last two fiscal years, a normalized earnings analysis with every add-back documented and supported, and customer concentration and revenue sustainability. It's a consulting engagement, not an audit or review. The SBA sets the scope, not an attest level, and provides no template.
The practical risk sits with timing. If the QoE-adjusted earnings don't support the price and structure already agreed to, the loan gets reduced or the shortfall has to be covered with equity. Diligence costs are financeable, and out-of-pocket QoE costs count toward the equity injection, but only if the report happens early enough to still shape the deal, not after everyone's already at the closing table.
For lenders, that makes this an underwriting discipline change as much as a documentation one: verified, normalized cash flow replaces reliance on unaudited seller financials, which reduces the odds of a credit loss traced back to overstated earnings after the fact. For buyers, sellers, and brokers, it means building QoE timing into the deal calendar from day one rather than treating it as a closing formality.
CRR Advisors performs lender-engaged QoE work built to the SOP 50 10 8.1 standard, led by David J. Richards, CPA, MST, our Head of Transaction Advisory, who has run hundreds of buy-side and sell-side engagements over more than 30 years. If you have a deal approaching the $3 million threshold, or you're a lender building this into your process before October 1, we're glad to talk through timing.