Do You Need a QoE for an SBA Loan?

Do you need a QoE for an SBA loan?

Also known as: SBA loan acquisition, SBA 7(a) loan, SBA business acquisition loan

Short answer

From 1 October 2026, SBA 7(a) acquisition loans with a business purchase price of $3 million or more require a quality of earnings report obtained by the lender under SOP 50 10 8.1. Below $3 million there is no mandatory QoE under this rule, though lenders may still ask for one.

Updated November 2026

SBA 7(a) acquisition, explained simply

The requirement applies to initial acquisitions and business expansions. Owner buyouts, ESOP and cooperative transactions and special purpose property are not covered. The lender obtains the report, so the buyer’s and the seller’s preparation matters. The Velonix briefing SBA QoE Requirement 2026: The Playbook explains what lenders ask for and how add-backs are tested.

Typical features are a loan ceiling set by the SBA (currently $5 million for a standard 7(a) loan), buyer equity of around 10% on a change of ownership, repayment terms of up to ten years, personal guarantees and an independent valuation for larger transactions. SBA rules also restrict some structures, such as earn-outs.

SBA buyers usually rely on SDE and tax returns, and smaller companies often have weaker records, so a QoE protects both buyer and lender.

Funding and debt service coverage

Illustrative

Riverbend HVAC Services, $ thousands

Cash available of $270,000 against debt service of about $146,000 gives coverage of about 1.85×.

Worked example

Riverbend HVAC Services	$
Purchase price	1,000,000
SBA loan	900,000
Buyer equity	100,000
Annual loan payment (10 years at about 10%)	about 146,000
SDE	360,000
Less: buyer’s own living salary	(90,000)
Cash available for debt service	270,000
Debt service coverage	about 1.85×

Riverbend HVAC Services is a fictional company. All figures are illustrative.

The lender checks that coverage comfortably exceeds its minimum, often around 1.25×, and may ask for a QoE to verify the SDE.

A note

SBA rules change periodically. Check the current SBA Standard Operating Procedure (SOP 50 10) or ask an SBA lender. This page is not financial or legal advice.

Why it matters in a deal

SBA lenders size loans on verified earnings, so the quality of the seller’s numbers directly determines whether the loan can be made.

Red flags

SDE that does not reconcile to tax returns
Large cash-based revenue with no bank trail
Add-backs the lender will not accept

Frequently asked questions

Do SBA lenders require a QoE?

From 1 October 2026, a lender-obtained QoE is required for 7(a) acquisition loans with a business purchase price of $3 million or more under SOP 50 10 8.1. Below $3 million it is not required under this rule, though many lenders still ask for one.

Can a seller note be part of an SBA deal?

Yes, subject to SBA rules on standby periods and on how much it counts toward equity.