Key Insight
From 1 October 2026, an SBA lender must see 1.25x debt service coverage on a standard business acquisition, up from 1.15x — and it has to be met on past results, not projections. The old rulebook let a marginal deal qualify on a forecast; that route is closed. Roughly 3 in 10 SBA acquisition loans are for $350,000 or less, and those get no lighter test when the money buys a business. A quality of earnings report is now mandatory at a $3m purchase price, with owner-occupied special-purpose property exempt.
The short answer
1.25 times. On a standard acquisition — what the rules call an Initial Acquisition — the business must show earnings of 1.25 times its debt payments. The previous standard was 1.15 times, and it applied to loans over $350,000.
The rule sits in Appendix 15 of SOP 50 10 8.1, the SBA's rulebook for lenders, in force since 1 October 2026.
The headline is the number. The change that actually reprices deals is quieter: coverage must now be demonstrated on historical cash flow. A deal that cleared 1.15x on a forecast of next year's growth no longer has that road.
Which deals the 1.25x test covers
Not every SBA deal is held to the same bar.
- Initial Acquisition — buying a business you do not already own. 1.25x.
- Owner Buyout — buying out a partner. 1.25x.
- ESOP — employee ownership transactions. 1.25x.
- Business Expansion — an operating business buying another in its own line. Stays at 1.15x.
That last distinction matters more than it looks. The same target can carry a different test depending on who is buying it.
It lands on ordinary deals, not just large ones
There is a reasonable assumption that a tightening like this is aimed at big transactions. The loan sizes say otherwise.
The median SBA 7(a) acquisition loan is $675,000, and 63% of them are under $1 million. A standard acquisition of any size must now clear 1.25x. The higher bar lands squarely on the normal deal.
Roughly 3 in 10 SBA acquisition loans are for $350,000 or less — the size the agency calls a 7(a) Small loan. The old rulebook set no fixed coverage test for those at all. It screened them on credit score.
The new rulebook gives 7(a) Small loans a lighter 1.10 test for other purposes. For buying a business, they get no allowance. For the smallest deals, a fixed coverage test is not a tightening — it is new.
What else moved on the same date
Three other changes landed with it.
SBA acquisition rules, before and after 1 October 2026
| Requirement | Before | Now |
|---|
| Debt service cover, standard acquisition | 1.15x | 1.25x |
| Quality of earnings report | Not required | Mandatory at a $3m purchase price |
| Seller-note seasoning before refinance | 24 months | 36 months |
| When the lender may value the business itself | $250,000 or less financed | $350,000 or less purchase price |
Tip: swipe horizontally to view all columns.
On the quality of earnings requirement: about 1 loan in 9 is $2.7m or more, which is the loan a $3m price implies with 10% down. A fifth of those large loans are for hotels, which are exempt when the building comes with the business.
There are two published versions of SOP 50 10 8.1.
The version the SBA released in August 2026 removed the lender's own valuation option and closed 7(a) Small loans to changes of ownership. The version published on 25 September 2026 — the one that actually took effect — reversed both.
If you are reading guidance written in August or early September, it may be describing rules that never came into force. Check it against the in-force text on the SBA's SOP 50 10 page.
In short
A standard SBA acquisition now needs 1.25x coverage, demonstrated on past results. Business Expansion deals stay at 1.15x. The smallest loans get a fixed test for the first time. A quality of earnings report is mandatory at a $3m price. And two versions of the rulebook exist — only the 25 September one is in force.
We set these rules against the loan-level record in our research on the transferable inventory, which counts what actually changes hands each year.
