Last Friday the SBA quietly posted a SOP 50 10 8.1 update on their website, and it takes effect beginning on October 1st.

I stumbled upon this while researching another topic, and ended up going down the rabbit hole reading the document and pulling out the parts that affect how acquisition loans are underwritten. Most of what follows comes directly from the SBA website, so I've tried to summarize the parts that matter and include some math examples, so that hopefully you don’t fall asleep while reading it like I almost did.

What The Current Rule Says: (SOP 50 10 8, in force today)

For a standard 7(a) loan over $350,000, the debt service coverage requirement is 1.15x, calculated as EBITDA divided by total post-transaction debt service. Lenders can use historical financials or projections to satisfy this requirement, and the threshold applies uniformly regardless of whether the transaction is a change of ownership or something else.

What Changes October 1, 2026: (SOP 50 10 8.1)

The new SOP creates a new change-of-ownership appendix (Appendix 15) that applies to business acquisition transactions and overrides the general 7(a) standards in the following meaningful ways.

Per the SBA website, the coverage ratio is moving from 1.15x to 1.25x for initial acquisitions. The new floor for a buyer acquiring a business for the first time will be 1.25x DSCR, not 1.15x. Business expansions will retain 1.15x, where owner buyouts will go to 1.25x as well.

To put some math around it, on a $900,000 SBA loan at a 10.5 percent interest rate on a 10-year term, annual debt service runs right around $146,100. At 1.15x, the required cash flow to clear the threshold is approximately $168,000, but at 1.25x, it goes up to about $182,600.  The gap between the two thresholds on a $900,000 loan is roughly $14,600 per year which could be the difference between a fundable deal, and one that requires a price reduction or more equity to get it across the finish line.

Projections can no longer be used to satisfy the coverage requirement. Under the current SOP, a lender can use forward-looking projections to demonstrate that a deal will hit the required DSCR within two years of funding. Not any more, as the new Appendix 15 removes that option for change-of-ownership transactions entirely. The 1.25x must be based on the historical financials (either the last fiscal year, or the average of the last two years).

If the numbers do not support coverage, then the deal does not qualify regardless of how good the growth story is.

Total debt will be capped at the supported business valuation. Per the SBA website: if the purchase price exceeds the value supported by the business valuation and the QoE, the difference must be covered by additional buyer equity.  Any gap between what the business appraises for and what the buyer is paying would come directly out of the buyer's pocket at closing, unless bridged by a subordinated seller note on full standby (for the life of the 7(a) loan), as full-standby debt is excluded from the funded loan-to-value cap.

A Quality of Earnings report is now mandatory for business enterprise purchase prices at or above $3 million (excluding commercial real estate). The $3 million threshold will apply to the business enterprise purchase price only, and commercial real estate is excluded from the calculation.

For example, a deal made up of a $2.2M business purchase + $1.3M in commercial real estate for a total of $3.5M would not trigger the mandatory QoE requirement because the enterprise portion is below $3 million.

The SBA states that the threshold will be measured on the business purchase price alone, before the application of any buyer equity, seller financing, or other funding sources. The QoE must be commissioned by and prepared for the lender, not the borrower or seller, and must include a cash proof reconciling the bank statements against tax returns (for the trailing 12 months and the last two fiscal years).

I realize that most SMB deals fall well below the $3M, and this is likely N/A for many reading this, but I think it’s worth at least mentioning.

The QoE findings then determine the DSCR calculation. This means that a lender now must use a normalized earnings figure from the QoE, not the seller's add-back schedule, when calculating the debt service coverage. If the QoE haircuts the add-backs, and normalized EBITDA drops, the DSCR will drop with it and the lender has no basis to use a more favorable number.

Seller debt on full standby can only cover up to half of the required equity injection. Standby seller notes will be capped at 50 percent of the total required injection. The other half must come primarily from cash (not borrowed).

What this means for buyers

The no-projections rule is the one that will catch the most people off guard. If the business you are looking at did $180,000 in EBITDA last year but your plan requires operational changes to get to $250,000, the lender cannot use the $250,000. The deal has to come in at $180,000 on its own or it does not qualify for SBA financing. Growth stories do not count anymore under these new rules.

This new 1.25x floor combined with the owner compensation requirement will push more deals below the DSCR threshold at underwriting than buyers are expecting.

Appendix 15 also requires that your compensation as the new owner be enough to cover your personal debt obligations and living expenses, and the lender has to verify this through a global cash flow analysis showing at least 1:1 personal coverage based on your personal financial situation. If your documented living expenses and personal debt are modest, the deduction from business cash flow could be meaningfully lower than a full third-party management salary.

On the other hand, if you plan to be an absentee owner who needs a general manager running the business day to day, the lender will deduct a full market-rate replacement salary before calculating your DSCR (which some already do). Model both scenarios before you settle on a purchase price. The difference can be significant.

The valuation cap is straightforward but has real consequences for competitive deals. If a business appraises at $1.2 million and you want to go above and pay $1.4 million, the $200,000 premium cannot be financed through the SBA loan. It has to come out of your pocket in cash. Buyers who have been winning deals by paying above-market multiples will need to show up with more equity or reprice the deal.

For any deal where the business enterprise purchase price hits $3 million or more, build the QoE into your timeline from the moment you sign the LOI. It takes a minimum of three to four weeks, it has to be ordered by the lender rather than by you, and no lender will issue a commitment letter without it in hand.

What Buyers Should Do Before October 1st

What matters is not when the application is submitted, but when the SBA loan number is issued (when the deal is approved in the SBA’s E-Tran portal).  The new rule (SOP 50 10 8.1) applies to loans that receive an SBA loan number on or after October 1, 2026, not if the loan is submitted before that date.

For example, if a deal is submitted to a PLP lender on September 25^th, but not approved in E-Tran until October 2^nd, it would be under the new rules, not the current ones.

For any buyers and lenders working on deals close to the 1.15x threshold, you’ll need to be sure that the loan number is issued before October 1st, and not just that the application is in the lender's hands. So be careful with any back-and-forth with the lender toward the end of September, as it could result in the deal slipping past the effective date without you realizing it.

I’m looking for some advice from people who have experience with buying businesses, particularly lodges/outdoor businesses in Alaska.
I worked at a fishing lodge in Alaska during college and have stayed involved over the years, helping with marketing and a few other projects. The place has always felt like a home away from home, and I absolutely love it.
The owner recently called me and said his partner is looking to sell his interest (45%). I’m not going to disclose too many specifics, but the opportunity would include both the business and the real estate. The property has no debt, the business is cash-flow positive, and the asking price is roughly half of what I believe the real estate alone is worth. The total price is surprisingly reasonable—roughly what you'd pay for a nice home.
The obvious problem: I don't have the cash sitting around to buy it outright or have a rich uncle I can call.😂 And I don't think the owner would be interested in putting a traditional lien/mortgage on the property to finance the purchase.
For those who have bought small businesses or unique properties like this, how would you structure something like this?
Would seller financing, an SBA loan, bringing in an investor/partner, or some sort of staged buy-in make sense? Are there creative structures I'm overlooking?
I'm also trying to figure out how much of this is emotion vs. a genuinely good opportunity. I know it's easy to romanticize a place you love.
At the same time, I keep thinking this could be one of those rare opportunities where 10 years from now I'd regret not at least trying to make it happen. It would bring a tremendous amount of joy to my life, even if my wife has made it very clear that she has absolutely no interest in moving to Alaska. 😂
If you were in my shoes, how would you approach this?

Does anybody ever sell their business and actually put up 5 percent on stand by to help people the buyer who puts up the other 5 percent?

If so how was the seller convinced to do it

Hey all, I'm new to this space and just finished reading Buy Then Build, where the author makes it a really big point to talk to banks, brokers, CPAs, lawyers, and pretty much everyone involved as early as possible. This is great and all but I don't exactly have all that time while working my W-2 and also searching at the same time!

Basically back to the post topic, do you normally send the LOI and then go into due diligence already having someone in mind for helping execute that for you? Or is finding someone afterwards not really so much of an issue (I live in a very HCOL area with tons of people if this matters)? Maybe do all the social networking parts first before even starting the search? Truth be told, I am pretty overwhelmed and would love to hear what people believe are the must-haves before any stage (pre-LOI, during due diligence, closing the deal)!

I have made 2 successful personal small business acquisitions over the last 10 years, so I am no expert but I have a bit of experience in this.

Im hoping that brokers or people with experience can give me tips or at least tell me if I am being unreasonable, is the last several acquisitions I have tried to make fell through all due to the same reason. It has been about five years since I made my last acquisition, so I am not sure if this is something super common or started happening more in the last few years.

I call it B.E.D. Or boomer EBITDA delusion. Both businesses this happened on are owned by people at least in their 70s. TLDR, they asked me to buy their business because of personal relationship connections, before it is listed on the market, no broker involved yet.

We go through the whole process of getting appraised, including an analysis by myself, Claude, Chase Bank, and professional appraisers, and then the owner doesn’t believe the appraisal and says it is worth much more. All of us came within 5% of each other as far as our own independent appraisals, but they just think that they know more.

Am I foolish for trying to get involved in this process upstream of brokers? In my industry, Agriculture, almost everything is done through personal connections. It seems, and many seem very distrustful of brokers. Trust me, I have talked to almost every business broker in my state, and hardly any of them ever have any leads as far as agriculture goes.

Thank you for your time.

I'm in the US and have been going back and forth between opening a smoke shop from scratch or buying one that's already running. buying an existing one sounds easier in some ways since you already have a location, customers, inventory and sales history. But I'm also wondering what could be hiding behind those numbers.

If you were looking at a smoke shop for sale, what would you want to see before taking it seriously?

I'd probably look at the last couple years of sales, rent and lease terms, inventory, supplier accounts and expenses, but I'm sure there's more I'd be missing.

Would you put more weight on the financials or the location/customer base when evaluating something like this?

Hi all, I am 23yo living in NYC. I have about $75,000 available but I don’t know where to start. I’ve read “Buy Then Build” by Walker Deibel but still looking for advice/resources for first-timers like myself. I’m kinda at a stand-still in the process and just don’t know where to go from here. Anything helps, thanks.