What changed on October 1, 2026
SOP 50 10 8.1 was issued on August 14, 2026 under Information Notice 5000-880695 and applies to any application assigned an SBA loan number on or after October 1, 2026. It keeps the framework of SOP 50 10 8, which took effect on June 1, 2025, and adds seven appendices numbered 14 through 20. The substantive changes sit in Appendix 15, a self-governing section on changes of ownership that controls wherever it conflicts with the rest of the document. The feasibility study, appraisal, environmental and construction requirements are not amended. The $5 million maximum is not amended. What is amended is how a lender may prove that a purchased business can service its debt. The full account of the update, including what it left unchanged and what it means for the feasibility study, is on our SOP 50 10 8.1 update page.
Under Version 8, a change of ownership was one category. Under 8.1 it is four, and the box a deal falls into decides its equity requirement, its coverage floor, its diligence requirement and its processing path. Initial Acquisition is the default and the most demanding; the lender must document in the credit memorandum why a deal qualifies for anything else, and the category is coded in the SBA loan system where the agency's oversight function can see it.
| Category | Who | Equity | Coverage | Quality of Earnings |
|---|---|---|---|---|
| Initial Acquisition | New majority or largest owner, not previously an owner or employee | 10%, cannot be reduced | 1.25x historical | Required at $3M business purchase price |
| Business Expansion | Existing operator, two full fiscal years under current ownership, buys 100% in the same four-digit NAICS group | 10%, lender may reduce or eliminate | 1.15x | Required at $3M business purchase price |
| Owner Buyout | Existing owners buying out other owners; outsider under 50% and not the largest holder | 10%, lender may reduce or eliminate | 1.25x historical | Exempt |
| ESOP or Cooperative | Plan or cooperative acquiring a controlling interest | None at 51% or more | 1.25x historical | Exempt |
Two rules apply across all four boxes. The 7(a) Small streamlined path is closed to changes of ownership at any size, so a $300,000 acquisition now goes through full Standard 7(a) underwriting. And total 7(a) debt is capped at the independent business valuation; any price above value has to be funded by equity or by seller paper on full standby.
How the calculator reads the SOP
Every rule the tool applies is stated here so a credit officer can check it against the document. SBA publishes 8.1 only as a Word file, so references are to the internal headings of Appendix 15 rather than to page numbers.
The coverage ratio
Appendix 15 defines coverage as EBITDA divided by combined post-transaction debt service, measured on either the last fiscal year-end or an average of the last two, on a historical or adjusted basis, with a rent add-back where the business is buying the real estate it occupies. The denominator includes the new SBA loan, existing debt as it will be structured after closing, and any seller debt that is not on full standby. Seller debt on full standby is excluded, which is consistent with its treatment as equity. Interest-only seller notes are underwritten on an amortization of no more than ten years so that a balloon does not flatter the ratio. Where a Quality of Earnings report is required, its earnings figure is the one that must be used, and if coverage does not support the price and structure the instruction is to reduce the loan, not to find a projection that works.
The Version 8 column
The comparison column reconstructs what a delegated lender could support under Version 8: 1.15x on loans above $350,000 and 1.10x on 7(a) Small Loans, on post-closing cash flow that could be supported by projections. The tool admits the sponsor's projection and the seller's recast in that column and carries an interest-only seller note at its actual interest cost. That is a reconstruction of common credit-memo practice, not a claim that every Version 8 lender underwrote that way; a conservative lender was always free to apply 1.25x on history, and many did.
The equity sources
8.1 divides injection sources into two buckets. Unlimited sources are the buyer's unborrowed cash, a personal loan to a guarantor repayable from outside the business, and grants without repayment conditions. Limited sources are standby debt, seller debt on full standby and, newly, equity from non-controlling minority investors holding less than 20 percent with no control; together they may fund no more than half of the required injection, and distributions to those investors are locked until the loan is repaid except for tax. Under Version 8 only the seller standby note was capped and investor equity was unlimited. The tool credits each source to its bucket under each version and reports the shortfall that has to come from unborrowed cash.
The Quality of Earnings trigger
On an Initial Acquisition or Business Expansion, a lender-ordered Quality of Earnings report is required where the business purchase price is $3 million or more, measured before the equity injection and before any seller note, and excluding the appraised value of any owner-occupied real estate in the deal. The tool subtracts the real estate you enter and tests the remainder. The report must reconcile bank statements to the income statements and tax returns for the trailing twelve months and the last two fiscal years, document add-backs, and assess customer concentration and revenue sustainability. It is a consulting engagement under AICPA CS Section 100, not an attest service, so the lender's engagement letter is the only control on its scope. The "add-backs disallowed" input models the haircut that diligence returns; the sensitivity table shows how far coverage falls as the haircut deepens.
What SOP 50 10 8.1 means for the SBA feasibility study
The trade summaries have read 8.1 as a tightening of acquisition lending, which it is. Read from the consultant's side of the file it is something more specific: a rule about which third-party report may be used to prove which thing.
There are three independent reports that can sit on a change-of-ownership credit file. The business valuation says what the business is worth and caps the debt. The Quality of Earnings report says whether the past is real and feeds the coverage test. The feasibility study says whether a projected business or project is viable. Only the last of the three tests the future. Appendix 15 removes the projection from the coverage test on acquisitions and installs the Quality of Earnings report to prove the past. It does not abolish the future-facing question. It moves it.
The codified basis for an SBA feasibility study is unchanged. 13 CFR 120.160(b) provides that SBA may require one, and the SOP leaves the decision to lender and CDC judgment, with the practical trigger being that repayment rests on projections rather than history. That captures start-ups under two years, complete changes of ownership where the buyer's plan departs from the seller's record, ground-up construction and major expansions, and special-purpose property. The five 504 triggers, market saturation, an unproven concept, a special-purpose property, a project disproportionate to the applicant's size, and rapid growth on unseasoned debt, carry forward. 8.1 adds no trigger and removes none.
What it does is change where the projection-dependent deal can live. Before October 1 a deal that only cleared 1.15x on a growth story could be financed as an acquisition on that story, sometimes with a study attached and often without. After October 1 it cannot be financed as an acquisition on that story at all. Four things can happen to it.
It can die. The cleanest lender response to a file that fails historical coverage is to decline it, and a declined deal generates no report of any kind. In the first year this is probably the most common outcome, and the acquisition market was already contracting before the rule: through the first nine months of FY2026 the 7(a) program ran about a third lower by count and a fifth lower by dollars than the same window a year earlier, on a base of 1,141 participating lenders in July 2026, a thirty-year low.
It can be recharacterized as a Business Expansion. The four-digit NAICS test and the removal of the geographic and identical-ownership tests make that materially easier for a seasoned operator, and the lane carries the lower 1.15x floor and a potential equity waiver. But the lane is underwritten on the acquirer's own two years of operating history and combined-entity cash flow. It does not, in general, generate a feasibility study.
It can be restructured as a partial change of ownership or an Owner Buyout, keeping the seller or an existing owner in the deal. The constraints are real: outside buyers must take less than 50 percent and cannot become the largest holder, asset-purchase structures are barred from partial-change treatment, multi-step partials are ineligible, and any retained seller equity triggers a full guaranty. It does not generate a study either.
Or the buyer can walk away from the acquisition and build instead, or open a de novo location in the same market as a start-up. Both are projection files. Both are files where a study is expected, and on special-purpose property both trip the 504 triggers. This is the one path that unambiguously grows the feasibility population, and it is the path the calculator is pointing at when it returns the projection-dependent verdict.
Our read is that the feasibility population grows at the margin, by substitution rather than by mandate, and that the growth is small and partly offset by a shrinking acquisition market and by the rational preference of lenders to decline rather than rebuild. The public data cannot settle it: the SBA loan-level file has no purpose field, no coverage field and no projections flag. What can be sized is the segment. In FY2025 the 7(a) program approved a record 78,078 loans for $37.3 billion, and change-of-ownership lending within it was about $8.29 billion across roughly 7,000 loans at an average of $1.18 million, on a third-party classification of the loan-level data.
Why the study is not the QoE, and cannot be
Lenders will be tempted, on a file at or above $3 million, to treat the Quality of Earnings report as the independent analysis and skip the study. On a stabilized business bought on trailing numbers that is correct; such a file never needed a study and still does not. On a projection-dependent file it is a category error. The Quality of Earnings report is a backward-looking reconciliation of cash to books, prepared under a consulting standard that prescribes no procedures and no report content. It does not size a trade area, it does not inventory competitive supply and pipeline, it does not test absorption, and it does not model the year in which the sponsor's plan either works or does not. Those are the tasks an independent feasibility study performs, and they are the tasks a credit committee or an SBA reviewer will look for when a file is being carried by a projection.
The distinction matters at purchase. When a loan defaults early, the reviewer holds every third-party report in the file and asks what each one was relied on for. A file that used a Quality of Earnings report to support a growth projection has used a report for a purpose it does not serve. A file that used a feasibility study to test the projection, and reconciled that study to the business valuation and to the going-concern appraisal on any special-purpose property, has an answer.
What a lender should ask the consultant for on an 8.1 file
The study on a post-October file should be written to the Appendix 15 category and to the lender's floor, not to a generic 1.15x. It should state the historical, diligence-adjusted coverage on the SOP's definition so that the reviewer can see the gap the projection is being asked to close. It should carry the projection as a scenario with its assumptions exposed, a downside case that removes the growth thesis, and the year in which coverage reaches the floor under each. On special-purpose property it should reconcile its stabilized income to the going-concern appraisal's allocation, because the appraisal's real-property value sets the collateral and the study's stabilized income will be compared to the appraiser's. And it should say, in one sentence the underwriter can quote, whether the deal is an acquisition file or a feasibility file. Our SBA feasibility study consultant page sets out the fifteen components a lender-grade study carries and how each is written for a delegated lender versus SBA program review.
A worked example
The calculator opens on a representative file. A first-time buyer, an Initial Acquisition by default, agrees to pay $3.4 million for a business that reported $540,000 of EBITDA at its last fiscal year-end and $500,000 the year before. The seller's recast adds $150,000 of add-backs. The buyer's plan projects $900,000 in year one. Total project cost is $3.65 million, financed with a $3.0 million 7(a) loan at 10 percent over ten years, a $285,000 interest-only seller note at 7 percent, $150,000 of the buyer's own cash and $215,000 from two passive investors. The loan number is expected in mid-October.
Under Version 8 the projection is admissible and the seller's recast is accepted. Coverage is $900,000 against about $496,000 of debt service, or 1.82x, comfortably above 1.15x. The equity injection of $365,000 is fully met because investor equity was unlimited. The file is an acquisition, and a delegated lender could have approved it.
Under 8.1 the projection is set aside. Diligence disallows half the add-backs, leaving $615,000 of adjusted earnings. The interest-only seller note is underwritten on a seven-year amortization rather than at its interest cost, taking total debt service to about $527,000. Coverage is 1.17x against a 1.25x floor. The supportable SBA loan at the floor is about $2.78 million, a reduction of roughly $220,000. The equity injection is short by $32,500 because the $215,000 of investor equity is now a limited source capped at $182,500. And because the business purchase price is $3.4 million, a lender-ordered Quality of Earnings report is required, and its earnings figure, not the seller's, will be the one used.
The file is no longer an acquisition on the terms proposed. It becomes one at a lower price or with more cash, or it becomes a feasibility file, in which the $900,000 projection is tested by someone who is not the sponsor. The calculator says which.
Lender checklist for files numbered on or after October 1
- Confirm in writing which SOP governs, from the expected E-Tran loan-number date, before scoping any third-party report.
- Assign the Appendix 15 category in the credit memorandum, with the conditions tested; Initial Acquisition is the default.
- Compute coverage on the SOP's definition: period, basis, add-backs and support, rent add-back, full denominator with non-standby seller paper at a ten-year amortization.
- Trace every dollar of the injection to a bucket and show limited sources at or below half.
- Order the business valuation and, on special-purpose property, the going-concern appraisal at engagement; both cap the loan.
- If the business purchase price is $3 million or more, order the Quality of Earnings report for the lender and treat any approval issued before it returns as conditional.
- If the deal clears only on a projection, scope an independent feasibility study to the category floor and treat the file as a feasibility file.
- Write a one-paragraph reconciliation of the earnings figures across the reports; the SOP will not supply one and a purchase reviewer will ask for it.
Frequently asked questions
- When does SOP 50 10 8.1 take effect?
- SOP 50 10 8.1 applies to any application that receives an SBA loan number on or after October 1, 2026. The test is the loan-number date in E-Tran, not the application or letter-of-intent date. Applications numbered on or before September 30, 2026 stay under SOP 50 10 8.
- What debt service coverage does SBA require for an acquisition under SOP 50 10 8.1?
- Appendix 15 sets a 1.25x floor for Initial Acquisitions, Owner Buyouts and ESOP transactions, measured on historical or adjusted earnings from the last fiscal year-end or the average of the last two. Business Expansions stay at 1.15x. Projections may be reviewed but may not be relied upon to meet the floor.
- What was the coverage requirement under SOP 50 10 8?
- Version 8 required 1.15x on 7(a) loans above $350,000 and 1.10x on 7(a) Small Loans, measured on post-closing cash flow, and lenders could support that cash flow with projections. That is the basis the calculator's Version 8 column uses.
- When is a Quality of Earnings report required?
- Under 8.1, on an Initial Acquisition or Business Expansion where the business purchase price is $3 million or more. The price is measured before the equity injection and before any seller note, and excludes the appraised value of owner-occupied real estate included in the deal. The report must be ordered by and prepared for the lender. Owner Buyouts and ESOP transactions are exempt.
- Do seller notes still count toward the equity injection?
- Yes, when subordinated and on full standby for the term of the 7(a) loan. That condition dates from SOP 50 10 8 on June 1, 2025. What 8.1 changed is that seller standby debt, other standby debt and non-controlling minority investor equity together may fund no more than half of the required injection.
- Does SOP 50 10 8.1 change when an SBA feasibility study is required?
- No. The feasibility, appraisal, environmental and construction requirements carry forward from Version 8 unchanged. What changes is that a change of ownership can no longer be underwritten on a projection, so a deal that only works on its growth story is no longer an acquisition file. If it is rebuilt as a start-up, a new build or a projection-dependent expansion, it lands on the tracks where an independent feasibility study is expected.
- Can a 7(a) Small Loan be used for a business acquisition after October 1, 2026?
- No. Appendix 15 states that 7(a) Small is not permitted for change-of-ownership transactions at any loan size. Every acquisition is processed under full Standard 7(a) underwriting.
- Is this calculator a credit decision?
- No. It applies the coverage, diligence and equity-source rules of the two SOP versions to the figures you enter and shows the difference. Lender credit policy, the operative SOP and the third-party reports on the file govern the actual decision.
Sources
- U.S. Small Business Administration, Information Notice 5000-880695, Issuance of SOP 50 10 8.1, August 14, 2026, effective October 1, 2026
- U.S. Small Business Administration, SOP 50 10 8.1, Lender and Development Company Loan Programs, Appendix 15, Changes of Ownership, and Appendix 14, Refinancing
- U.S. Small Business Administration, SOP 50 10 8, Lender and Development Company Loan Programs, effective June 1, 2025
- 13 CFR 120.160(b), professional appraisals, surveys and feasibility studies; 13 CFR 120.10, loan program requirements
- NAGGL, Two Major SBA Announcements: Issuance of SOP 50 10 8.1 and a New Expansion of the ITL Program, August 14, 2026
- Coleman Report, This Just In: SBA Releases SOP 50 10 8.1, Effective October 1, 2026, August 14, 2026
- CliftonLarsonAllen, The SBA Now Requires a Quality of Earnings on Larger Acquisition Loans, August 2026
- Doeren Mayhew, SOP 50 10 8.1: What SBA Lenders Should Be Thinking About Before Oct. 1, 2026
- Pioneer Capital Advisory, SBA Investor Equity Rules 2026: SOP 50 10 8.1 vs 8, and SBA Expansion Acquisition Rules 2026, August 2026
- EBIT Community, SBA SOP 50 10 8.1: New Business Acquisition Rules, August 2026
- Starfield and Smith, Best Practices: Financing Partial Changes of Ownership Under SOP 50 10 8, 2025
- AICPA, Statement on Standards for Consulting Services, CS Section 100
- U.S. Small Business Administration, News Release 25-41, FY2024 7(a) cash flow and fee waivers, March 27, 2025
- U.S. Small Business Administration, 7(a) and 504 Activity Reports, FY2025 year-end
- Lumos Data, SBA 7(a) Loan Data and Program Performance: FY2026 Analysis, and SBA 7(a) Default Rates 2026
- GoSBA Loans, SBA Loan Default Rates: Startups vs Acquisitions vs Working Capital, March 2026
- NAGGL, President Signs Continuing Resolution Through December 11, September 3, 2026
This tool and article are prepared for practitioner use and do not constitute legal, tax or regulatory advice. SBA publishes SOP 50 10 8.1 only as a Word document; references are to the document's internal headings. Verify the operative rule against the current SOP at the loan-number date.