The SBA QoE Playbook
From 1 October 2026, larger SBA acquisition loans need a lender-obtained QoE. What changed, who does what, and how add-backs are tested.
Published 6 November 2026
Two dates matter.
The SBA rulebook changed on 1 October 2026. For 7(a) acquisition loans with a business purchase price of $3M or more, the lender must now obtain the quality of earnings report. It cannot be prepared by or for the seller.
SBA reissues SOP 50 10 8.1 with technical updates (Notice 5000-882227), replacing the 14 August version.
SOP 50 10 8.1 replaces SOP 50 10 8 (June 2025) for 7(a) and 504 lending.
The $3M line decides it.
Which SBA 7(a) acquisition loans need a lender-obtained QoE depends on the business purchase price.
Initial Acquisition
Business Expansion
Owner Buyout
ESOP / cooperative
Special purpose property deals
Business purchase price is measured before buyer equity or seller financing, and excludes owner-occupied real estate.
Four more changes in the same rulebook.
SOP 50 10 8.1 also tightens how acquisitions are underwritten. The lender-obtained QoE is one part of a wider tightening.
Cash activity reconciled to reported results for the trailing 12 months and the two most recent fiscal years. See proof of cash.
Minimum for an Initial Acquisition (1.15x for a Business Expansion), on the last fiscal year or a two-year average.
Requested by and prepared for the lender by a qualified source. In-house at $350,000 or less.
Standby debt, seller debt and minority equity together can fund no more than half of the required injection.
Under the new rule, the QoE is for the lender.
For 7(a) acquisitions of $3M or more, the QoE must be obtained by the lender, for the lender’s benefit. A report the buyer commissions can still be used, but only after one of the lender’s approved vendors reviews it.
Obtains the QoE, or has a buyer’s report reviewed.
Prepares the report for the lender.
Supplies the deal and financials.
Supplies the records behind the numbers.
From cash proof to coverage.
Every adjustment that lowers earnings also lowers debt service coverage.
Cash activity is reconciled to reported results for the trailing 12 months and two fiscal years.
The independent report tests which earnings are real and repeatable.
QoE earnings for the last fiscal year or a two-year average feed the test.
Minimum 1.25x for an Initial Acquisition, 1.15x for a Business Expansion.
Four questions to ask your lender before you sign a letter of intent
A seller’s add-backs are a claim. The QoE decides how much of it survives.
Under SOP 50 10 8.1, the lender-obtained QoE must document all add-backs and adjustments, and the result feeds the debt service coverage test. So every add-back is tested against support.
Illustrative figures only. Synthetic numbers, not client data.
- Owner pay reset to a market salary
- Genuine one-off costs, with the invoice
- Personal costs run through the business
- Related-party rent reset to market
- “One-time” costs that recur every year
- Normal operating costs called discretionary
- Family payroll with no clear role
- Anything with no invoice, contract or paper trail
The test is the paper trail, not the label.
Build the file before the lender asks.
Five things to hold for every add-back.
What to do now
Three groups, one habit: document early.
Ask which add-backs the lender will accept before you price the deal.
Document every add-back now. Unsupported ones are challenged first.
Lender-driven work needs capacity. Velonix supports CPA firms and advisers with white-label QoE, with same-day turnaround.
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