Buying or Selling a Business? What to Know About the SBA’s New Rules
If you're buying or selling a business using SBA financing, October 1, 2026, is a date worth knowing.
SBA SOP 50 10 8.1 introduces updates to the 7(a) and 504 loan programs that could affect how business acquisitions are evaluated, financed and structured.
Here are four changes buyers and sellers should have on their radar.
$3M+ Deals Get More Financial Scrutiny
For qualifying change-of-ownership transactions with purchase prices of $3 million or more, an independent Quality of Earnings (QoE) analysis is required.
A QoE takes a closer look at the company's financial performance and asks a simple question:
"Are these earnings really sustainable?"
It can examine:
Revenue trends
Recurring vs. one-time income
Owner-related expenses
Unusual expenses
Normalized earnings
Overall profitability
Why should sellers care?
Clean financials are more important than ever.
If you're considering selling, getting your books organized before going to market can help reduce surprises during due diligence.
First-Time Buyers: Historical Cash Flow Takes Center Stage
First-time buyers should pay close attention to this one.
For an initial acquisition, historical cash flow must be used to meet the 1.25x Debt Service Coverage (DSC) requirement rather than relying on projections.
In simple terms, a business generally needs to demonstrate enough historical cash flow to support its proposed debt.
For example:
$200,000 annual debt service × 1.25 = $250,000 required cash flow
That means buyers shouldn't focus only on what they think the business could make.
They need to understand what the business has actually been producing.
Great growth plans are exciting. Strong historical cash flow is the foundation.
Sellers Can Potentially Stay Involved Longer
Selling doesn't always mean handing over the keys and disappearing the next morning.
SOP 50 10 8.1 extends the allowable seller consulting period from 12 months to up to 24 months, subject to applicable SBA requirements.
This could be particularly useful for businesses where the seller has years of industry knowledge and relationships.
A longer transition can help with:
Training the new owner
Introducing key customers
Transferring vendor relationships
Teaching operational procedures
Passing along industry knowledge
For buyers, that's potentially more time to learn the business.
For sellers, it can create a more structured transition out of the company.
Buying the Business Isn't the Only Expense
You bought the business. Great.
Now you have payroll, equipment, suppliers, repairs and plenty of other bills waiting for you.
That's why working capital matters.
The updated guidance clarifies rules around pairing an acquisition term loan with working capital financing, subject to applicable requirements.
The important distinction:
Acquisition financing = buying the business
Working capital = helping operate the business
Thinking about both early can help buyers avoid focusing so heavily on the purchase price that they forget about the cash needed to run the company afterward.
What Does This Mean for Buyers?
If you're planning an SBA-financed acquisition, start preparing early.
Before making an offer:
Review historical financial statements
Understand the company's cash flow
Calculate potential debt service
Consider your working capital needs
Understand how involved the seller will be after closing
Speak with an SBA lender early in the process
Don't just ask, "Can I buy this business?"
Ask:
"Can this business support the financing after I buy it?"
What Does This Mean for Sellers?
Sellers should also prepare before putting a business on the market.
Make sure you can clearly explain:
Where revenue comes from
What drives profitability
Recurring vs. one-time expenses
Your role in daily operations
Key customer and vendor relationships
Growth opportunities
Historical cash flow
The better organized the business is before entering the market, the fewer financial surprises there may be later.
The Bottom Line
SBA SOP 50 10 8.1 brings several changes that could directly affect business acquisitions beginning October 1, 2026.
The big four to remember:
$3M+ acquisition → Independent QoE
First-time buyer → Historical cash flow matters
Seller transition → Up to 24 months
Acquisition financing → Working capital pairing clarified
For buyers and sellers, the message is simple:
Prepare early. Understand the numbers. Structure the deal carefully.
The SBA rules can be detailed, and individual transactions may have additional requirements. Always confirm the specific requirements of your transaction with your SBA lender and professional advisors.
This article is for general informational purposes only and is not legal, tax, accounting or lending advice.
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