The October 1 SBA quality-of-earnings rule and what it does to your acquisition

If you are buying a company with SBA financing and the purchase price is $3M or more, you now need an independent quality of earnings report before the loan closes. The requirement sits in SBA SOP 50 10 8.1 and takes effect October 1, 2026. It is the single biggest change to small-business acquisition financing in years, and most buyers currently in process have not priced it in.

What the rule actually says

The short version: for SBA 7(a) loans financing a business acquisition where the purchase price is at or above $3,000,000, the lender must obtain an independent quality of earnings analysis prepared by a qualified third party. Two details matter and are widely misread:

• The threshold is measured on purchase price, not loan amount. It is assessed before any equity injection and before any seller-note financing. A $3.4M deal with $1.2M of seller paper and $600K of your own equity still crosses the line.
• Owner-occupied real estate is excluded from the purchase price for the purposes of the test. If the deal includes the building the business operates from, that portion comes out before you measure against $3M.

"Independent" is doing real work in that sentence. The seller's accountant does not qualify. Neither, in most lenders' reading, does your own in-house analysis. It is a third-party engagement with a deliverable the lender puts in the credit file.

Verify before you rely on it. This is our reading of SOP 50 10 8.1 as of September 2026, cross-checked against published guidance from CLA, EisnerAmper and GA Group. SOPs get amended and lenders interpret them differently. Confirm the current text and your specific lender's application before you make a decision on it.

Who it hits

Three groups, in descending order of pain:

1. Searchers and first-time buyers in the $3M–$6M band. This is the group that was already stretched. A QoE is a new five-figure cost, arriving before close, that cannot be financed and cannot be waived. Some of these deals will simply not happen.
2. Buyers already under LOI with an expiring exclusivity period. A QoE takes weeks. If your LOI expires in November and your lender only raised this in October, you are renegotiating an extension from a weak position.
3. Sellers of marginal businesses. This is the interesting one. A QoE is exactly the process that finds the add-backs that do not survive contact with a bank statement. Sellers who have been carrying an inflated adjusted EBITDA are about to have it examined by someone the buyer's lender chose.

What a QoE costs in money and time

For a lower-middle-market deal, expect a meaningful five-figure engagement and three to six weeks depending on how organized the seller's records are. The variance is almost entirely about the seller, not the provider: a company with clean monthly closes and a real general ledger gets through it quickly, and a company that runs on a shoebox and a bookkeeper's memory does not.

Budget it as a deal cost that you may spend and then walk away from. That feels like waste. It is not — a $40,000 QoE that stops a $4M purchase of a business earning half what the seller claimed is the highest return you will ever get on a professional fee.

Why we do not build on SBA paper anyway

Blue Collar CFOs does not structure acquisitions on SBA financing. That predates this rule and it is not ideological — it is about what the paper costs you beyond the rate:

• The personal guarantee. SBA loans come with an unlimited personal guarantee and, in most cases, a lien on your home. The whole point of a properly structured acquisition is that the deal stands on its own numbers. A guarantee secured by your house is the opposite of that.
• Timeline. SBA processes are long and they are slow at exactly the wrong moments. Sellers in the trades lose patience, and the good deals go to the buyer who can close.
• Covenant and structure rigidity. There is limited room to structure around a working capital problem or an earn-out when the loan program dictates the shape of the deal.

We build on conventional and private credit, seller notes, rollover equity and, where it fits, a corporate guarantee rather than a personal one. That takes more work to arrange. It also means a bad year does not cost you your house.

What to do if you are mid-process

• Ask your lender in writing how they are applying the threshold to your specific deal, including the real estate carve-out. Get the answer before your exclusivity runs.
• Check your LOI's expiry against a realistic QoE timeline and negotiate the extension now, while you still have leverage.
• Run your own screen first. If the earnings will not survive an independent QoE, find that out for a fraction of the cost before you commission one.
• Price the alternative. A conventional or private credit structure may now be competitive on all-in cost and timeline in a way it was not twelve months ago. Model both.

If you are working a live target and want a read before you commit to a QoE engagement, that is exactly what our Survival Underwrite Report is for — a fixed-fee earnings normalization and deal screen, delivered fast, on one target. See how it works, or send us the numbers.