What Do the New SBA Rules Mean for Business Acquisitions?

Everyone is talking about the new Quality of Earnings requirement, but that isn’t the only change that could affect an SBA-financed acquisition.

The SBA published SOP 50 10 8.1 on September 25, 2026, which applies to applications SBA receives on or after October 1, 2026.For buyers using an SBA 7(a) loan, the changes could affect how much they need to contribute, whether the business earns enough to cover loan payments, and how long the seller can assist with training and transitioning after closing.

If you’re purchasing your first business, it may be helpful to discuss these updates with your lender or financial advisor before you submit an offer.

What Changed?

Quality of Earnings reports are now required for certain larger acquisitions.

New acquisitions and business expansion loans with a business purchase price of $3 million or more will now generally require an independent Quality of Earnings (QofE) report. This reviews the financial records and checks whether reported earnings are supported, including by bank activity.The lender must use the report’s earnings findings when evaluating repayment ability.This is required in addition to an independent business valuation.

Minimum debt service coverage has increased for new acquisitions.

For new acquisitions, the minimum debt service coverage ratio has increased from 1.15x to 1.25x.For most acquisitions, projected growth after closing does not make up for a shortfall in historical earnings.

Down payment rules were updated.

New acquisitions still require an equity injection of at least 10% of the total project cost. Under the updated rules, seller financing, other standby debt, and certain minority investments can collectively cover no more than half of the required down payment. Debt used towards the contribution must be on full standby for the entire term of the loan.

More acquisitions may qualify as “business expansions”.

Business expansion rules now use a broader industry classification and no longer require the acquired business to be in the same geographic area. The acquiring business must have operated for at least two full fiscal years under its current ownership, purchase 100% of the target business, and meet other expansion requirements. The lender may reduce or waive the typical 10% equity injection requirement if the business meets specific financial metrics.

Partial ownership acquisitions may face new requirements.

In partial buyouts, a new owner who hasn’t worked at the business at least 24 months and buys 50% or more, or becomes the largest owner, must meet first-time acquisition standards. This includes down payment, cash flow, and, for purchase prices of $3 million or more, QofE requirements.

Seller financing rules have changed.

Seller financing requiring payments can no longer cover the portion of a business purchase price above its supported valuation. The minimum period before a seller note can qualify for SBA refinancing has increased from 24 to 36 months, during which it must be current and not on standby.

Seller can help with the transition for a longer period.

An exiting seller may now provide consulting or training and transitioning services for up to 24 months, rather than 12.The seller must generally serve as an independent consultant, not an employee. Different rules apply when a seller is maintaining ownership interest.

Amortization terms have changed for acquisitions involving real estate.

Previously, an acquisition loan that included real estate could qualify for a term up to 25 years when at least 51% of the loan proceeds funded real estate. Now, these loans will generally require a blended term, or separate loans for the business and real estate. A shorter term will mean higher payments, which can affect how much a buyer can borrow.

What Should Buyers and Brokers Do Next?

Before finalizing an offer, have True North Business Funding review the target business’s financials and historical earnings, the buyer’s personal financial statement (PFS) and available funds, any seller financing, and the expected loan term. Many lenders have requirements beyond the SBA’s minimums, so lender selection matters too.

True North Business Funding helps buyers and brokers evaluate financing options, connect with lending partners, and work through underwriting, due diligence, and closing.

If you’re considering a business acquisition or have a transaction underway, contact our team to discuss how the updated requirements may affect your financing.