The new rules form SOP 50 10 8.1 taking effect October 1 rebuild how business purchases get underwritten, and the SBA is direct about why: acquisitions have become one of the largest categories of 7(a) lending, and they carry credit risk other lending doesn't. Someone buying a company they've never operated is a different bet than a business borrowing against its own history. Everything that follows comes back to one question: can this buyer run this business and repay from its cash flow.

every deal now gets a type

Four of them, and yours determines your economics. 

A first-time acquisition is a buyer with no prior ownership or employment in the business. An expansion is an operating company — two full years under current ownership — buying another business in its own industry. An owner buyout restructures ownership among people already there, with at least one original owner staying on and guaranteeing. And employee ownership covers ESOPs and cooperatives taking control.

Here's what matters: first-time acquisition is the default. If your deal doesn't clearly document itself as something else, it lands there and it's the strictest of the four.

The type sets the money

First-time buyers need 1.25 times cash flow coverage and a 10% down payment that cannot be reduced or waived under any circumstance. An operating company buying a competitor needs 1.15 coverage, and its down payment can be reduced or even eliminated if the buyer has demonstrated liquidity and didn't close last year with negative net worth. Owner buyouts and employee ownership deals sit at 1.25 with similar flexibility on the down payment. 

Above $3 million, the earnings get independently verified 

First-time acquisitions and expansions at or above that purchase price now require a Quality of Earnings report on top of the valuation. It reconstructs cash receipts and disbursements from bank statements and reconciles them against the income statement and tax return — trailing twelve months plus the last two fiscal years — to separate real, recurring earnings from everything else.

That number isn't advisory. It drives the cash flow calculation, and if it doesn't support the asking price, the loan gets reduced. Note also that the threshold is measured on the purchase price before any down payment or seller financing, so restructuring the deal won't get you under it.

Two more worth knowing

Both the valuation and the earnings report must be commissioned by the lender; a report the seller ordered doesn't count. And the streamlined SBA small loan program is no longer available for acquisitions, so every business purchase runs through full underwriting regardless of size.

Questions about how this applies to a specific deal? Our team is happy to walk through it.

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