Blog · Published 2026-10-18
SBA quality of earnings requirements: what a buyer needs to know.
From 1 October 2026, certain acquisitions financed with SBA-guaranteed loans need a quality of earnings analysis, under SBA SOP 50 10 8.1. AAFCPAs summarizes it as applying to deals with a purchase price of $3 million or more, excluding the value of any owner-occupied real estate, prepared by an independent financial professional engaged on behalf of the lender. Read the SOP and ask your lender before relying on any summary.
What the requirement says, by source
We have read the AAFCPAs article (14 September 2026) and quote it below. We have not reproduced the SOP itself here; the passages from it that we do quote are the ones on our quality of earnings software page, attributed there to Appendix 15.
| Point | What the source says | Source |
|---|---|---|
| Start date | "Beginning October 1, 2026, certain acquisitions financed with SBA-guaranteed loans will require" a quality of earnings analysis. | AAFCPAs |
| Threshold | A purchase price of "$3 million or more, excluding the value of any owner-occupied real estate." | AAFCPAs |
| Exclusions | "Certain transaction types, including owner buyouts and ESOP transactions, are excluded." | AAFCPAs |
| Who prepares it | "The report must be prepared by an independent financial professional engaged on behalf of the lender." | AAFCPAs |
| Not the seller | It cannot be prepared by or for the seller, and the lender uses the QoE earnings in its coverage calculation. | Our summary of Appendix 15 on the quality of earnings software page |
| Coverage basis | The debt service coverage ratio must be satisfied using either the last fiscal year-end or an average of the last two fiscal year-end statements, on either a historical or adjusted basis. | SOP 50 10 8.1 as quoted on our page |
What it means for the order of work
- Ask your lender early who engages the provider, who pays, and what documents they need. AAFCPAs advises discussing the requirement early because it can add coordination earlier in the deal process.
- Make sure the data room holds the year-end statements the coverage test uses. A room with only trailing-twelve-month figures is incomplete for this; see the data room checklist.
- Do your own first pass before the engagement, so the independent report starts from known differences. This is what the SBA 7(a) first pass page describes for QoE providers and lending teams.
What software does and does not do here
Deal OS runs an SBA coverage check as arithmetic from the stated figures and your financing terms. It can tell you when the purchase price triggers the requirement and when only trailing figures clear the test. It is not the independent report, and the lender, not the software, decides. See the sandbox for a brief on a synthetic deal.
Worked example from the sample brief
How the sample brief (a synthetic deal) handles the coverage question, quoted from it:
- A test that waits for the right years. The SBA 7(a) coverage check reports "Not enough to test" because every EBITDA figure in the data room is trailing-twelve-month. On that basis the deal "would show 2.28x against the 1.25x floor, but that number cannot carry the loan." The illustrative financing is a $4.0M purchase price with a $3.6M SBA 7(a) loan at 10.5% over 10 years.
- The requirement flagged. The Quality of Earnings report line reads "Required (price $3M or more)".
The example is Sentinel Fire & Safety, Inc., a synthetic company built to show the product. Nothing in it describes a real business, and the same output shape applies to a real data room. See the whole thing at /sample-brief.
See it on a deal.
Open a real brief on a synthetic deal without an account, or check how a single deal is priced.
