Article by:
Rachel Lugo
Read the full article at stellaandmain.com/blog-sba-rules-october-2026
On August 14, the SBA issued SOP 50 10 8.1, the updated rulebook governing how lenders underwrite 7(a) and 504 loans. It takes effect October 1, 2026. Most of the coverage has been written for buyers and lenders, which makes sense since it's their loan. But if you're selling a business in the $1M to $5M range, this is your problem too. Most buyers in that range need SBA financing to close, which means the rules that determine whether your buyer gets approved are the rules that determine whether your deal happens.
One line matters more than the rest right now. Applications issued an SBA loan number on or after October 1 fall under the new SOP. Files submitted through September 30 stay under the current rules. If you're in a deal today with an LOI signed or diligence underway, ask which side of that line your file sits on, ask in writing, and get the lender to confirm in writing. A deal that pencils today under the current standard can need a bigger equity check or a lower price under the new one.
The change with the most teeth is the debt service coverage requirement. For Initial Acquisitions and Owner Buyouts, the floor rises from 1.15x to 1.25x. More significant than the number is how it gets demonstrated: on historical or adjusted earnings, with projections excluded. Under the old rules a buyer with a credible growth plan could lean on projections to make a deal pencil. That door is closing. The business has to already earn enough to cover the debt based on what it has done, not what a buyer believes it will do. If your price depends on where the business is headed, that story no longer carries an SBA deal.
Two more requirements land on sellers directly. Every change of ownership now requires an independent business valuation, and the lender has to analyze whether it supports the purchase price. Sellers anchored to a number based on what a friend got, or a multiple they read somewhere, will meet a third party who disagrees during diligence, at the point of least leverage and most sunk cost. And deals at $3 million or more require a Quality of Earnings report ordered by the lender. A buyer-commissioned or seller-commissioned report doesn't satisfy it, though your own analysis still tells you what your adjusted earnings are before you set a price.
Not everything tightened. Sellers can now stay on as consultants for up to 24 months post-close, doubled from 12. The SOP formalizes pairing acquisitions with revolving lines of credit. But read together, the changes point one direction: the SBA wants deals financed on what a business has demonstrably earned, verified by third parties, at a price someone independent will defend. That isn't hostile to sellers. It's hostile to unprepared ones. If your financials are clean and your business runs on more than your personal involvement, your buyer clears 1.25x without difficulty.
Not sure if you are ready? Get your score here: https://stellaandmain.com/sellability-score
