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New SBA Loan Rules Took Effect October 1, 2026: What Borrowers, Buyers and Sellers Need to Know
SOP 50 10 8.1 now governs every SBA 7(a) and 504 loan that gets a loan number on or after 1 October 2026. Here is what actually changed — the 1.25x cash-flow test on acquisitions, the quality-of-earnings rule, the end of earn-outs, the new fee waivers — and what it means if you are borrowing, buying or selling a business this quarter.
What Changed in the SBA Rules on October 1, 2026?
The SBA’s revised lending manual, SOP 50 10 8.1, applies to loans that receive an SBA loan number on or after 1 October 2026. The biggest changes hit business purchases: debt service coverage of at least 1.25x on the last fiscal year or a two-year average, with projections no longer allowed to carry the test; a quality-of-earnings report on purchases of $3 million or more; seller earn-outs prohibited; standby seller notes and other limited sources capped at half of the 10% equity injection; personal financial statements dated within 90 days; and sellers allowed to consult for up to 24 months. The same day, the FY2027 fee schedule took effect, with a 0% upfront guaranty fee on 7(a) loans of $700,000 or less for manufacturers, food supply chain businesses and businesses in rural areas. Loans approved before 1 October stay under the old rules.
Which Rules Apply to Your Loan
The first thing to establish is which rulebook your loan falls under. The trigger is the date the SBA assigns a loan number, not the date you applied or the date you close. A file approved by a Preferred Lender on 29 September 2026 is an SOP 50 10 8 loan and closes under the old rules even if funding happens in November. A file that gets its loan number on 2 October is an 8.1 loan, with everything below applying. Lenders had training sessions and office hours through late September to get ready, and most expect a bumpy six to eight weeks while files started under one set of rules are re-papered under the other.
If You Are Buying a Business
Business purchases are where the new SOP bites hardest. Change-of-ownership loans are now split into four categories — initial acquisition, business expansion, owner buyout, and ESOP or cooperative purchase — each with its own coverage and equity rules.
| Rule | Before 1 Oct 2026 | From 1 Oct 2026 |
|---|---|---|
| Debt service coverage | 1.15x, historical or projected | 1.25x on initial acquisitions and owner buyouts (1.15x on expansions), measured on EBITDA for the last fiscal year or a two-year average; projections cannot carry the test |
| Equity injection | 10% of project cost | 10%, and it “cannot be reduced or eliminated” on a first acquisition |
| Seller notes and other limited sources | Could fund up to half of the injection if on full standby | Same cap, now applied to standby seller debt, other standby debt and sub-20% minority investors combined |
| Seller earn-outs | Discouraged | Prohibited; a performance-based rebate to the buyer is allowed only if it pays down the 7(a) loan |
| Quality of earnings report | Lender discretion | Required on initial acquisitions and expansions with a purchase price of $3 million or more (seller-prepared reports not accepted) |
| Business valuation | Lender could self-value up to $250,000 in financing | Lender may self-value when the purchase price is $350,000 or less and the parties are unrelated; otherwise independent valuation |
| Seller as consultant | Up to 12 months | Up to 24 months total |
| Refinancing a seller note | Eligible after 24 months current | Eligible after 36 months current |
| Personal financial statement (Form 413) | Within 120 days | Within 90 days of approval for 20%+ owners and guarantors |
| 7(a) Small and SBA Express for purchases | Allowed | Allowed again under the 25 September reissue (the August draft had barred them), with the same coverage floors |
A $1,000,000 purchase under the new rules: what the SBA will finance
Plus a 1.25x coverage test on the business’s actual last-year earnings. A price the trailing numbers cannot support now needs more buyer equity or a lower price — not a rosier forecast.
The practical effect: deals are sized to what the business has already earned. A buyer who was counting on projected growth, a seller note that pays current interest, or an earn-out to bridge a valuation gap needs to restructure. Many attorneys expect weaker buyers to drop out and well-prepared buyers to face less competition. See how much the down payment on an SBA loan is and business acquisition loans.
If You Are Selling a Business
- Expect a quality-of-earnings review if your price is $3 million or more. Budget four to eight weeks and $5,000 to $25,000 for it, usually paid by the buyer; have clean books and tax returns that match the IRS transcripts.
- Earn-outs are off the table on SBA-financed deals. If part of your price depended on future performance, the structure now has to be a lower price, more buyer cash, or a standby note you do not collect on until the SBA loan is repaid.
- A standby note means fully standby: no principal, no interest, for the life of the loan, if it is to count toward the buyer’s equity.
- You can stay on longer. Consulting agreements of up to 24 months are now allowed, which helps in licensed trades where the buyer needs time to qualify.
- If you keep less than 20% after a partial sale, you still give a limited guaranty for two years; 20% or more, you guarantee the loan in full.
If You Are Borrowing for Your Existing Business
For working capital, equipment, refinancing and expansion loans to a business you already own, the October changes are lighter. The important ones:
- Fees went down for three groups. Manufacturers (NAICS 31–33), food supply chain businesses and businesses in rural areas pay no upfront guaranty fee on 7(a) loans of $700,000 or less, and no SBA fees on 504 loans. Everyone else pays 2% to 3.75% of the guaranteed portion. See SBA loan fees explained.
- Expansion loans still need 10% equity on paper, but the lender can reduce or waive it when liquidity and working capital are adequate and net worth was not negative at the last fiscal year end.
- Personal financial statements must be fresh — dated within 90 days of approval.
- Lenders may refinance their own debt under delegated authority as long as their exposure to you does not fall, which makes refinancing an existing bank loan into a 7(a) simpler.
- SBA Express lines whose amortization schedule is too tight can now be reissued before amortization starts, giving a longer revolving period.
- Trust-owned businesses face new guaranty rules: the trust guarantees at any ownership percentage and the trustor guarantees personally.
The Full 2025–2026 Rule Timeline
| Date | Change |
|---|---|
| 1 June 2025 | SOP 50 10 8: 10% equity injection restored; small-loan threshold cut to $350,000; MCA and factoring refinancing removed; Franchise Directory reinstated |
| 1 October 2025 | FY2026 fees, including a 0% upfront fee for manufacturers up to $950,000 |
| 1 March 2026 | SBSS score retired for 7(a) small loans; 1.10x DSCR floor; citizenship/ownership rule in force |
| 4 July 2026 | Combined 7(a) and 504 limit raised to $10 million |
| 14 August 2026 | SOP 50 10 8.1 published |
| 25 September 2026 | SOP 50 10 8.1 reissued with technical corrections (7(a) Small and Express allowed on purchases; $350,000 self-valuation threshold) |
| 1 October 2026 | SOP 50 10 8.1 and FY2027 fee schedule take effect |
What to Do Now
- Confirm which SOP your file is under. Ask the lender for the loan-number date. Do not assume.
- Re-run the coverage math on trailing earnings. If last year’s EBITDA does not cover the proposed payments at 1.25x, change the price, the equity or the structure before you spend on a QoE.
- Line up verified cash. At least half of the 10% must be buyer cash from a documented source; a seller note can cover the rest only on full standby.
- Order the QoE early on a $3 million-plus deal, from a vendor the lender accepts.
- Refresh every personal financial statement to within 90 days before submission.
- If SBA no longer fits the deal, look at a term loan for the working-capital piece, or at large business loans up to $2 million in 72 hours while the acquisition structure is reworked. RAN Funding places SBA files with lenders already lending in your industry and tells you up front whether the new rules change your odds.
Common Questions
When did the new SBA rules take effect?
SOP 50 10 8.1 applies to SBA 7(a) and 504 loans that receive an SBA loan number on or after 1 October 2026. Loans approved before that date remain under SOP 50 10 8.
What is the new DSCR requirement for SBA acquisition loans?
1.25x on initial acquisitions and owner buyouts, measured on the business’s EBITDA for the last fiscal year or a two-year average. Projections can no longer satisfy the test. Business expansions stay at 1.15x.
Are seller earn-outs still allowed on SBA loans?
No. SOP 50 10 8.1 prohibits earn-outs. A performance-based rebate from seller to buyer is allowed only if it is applied to pay down the 7(a) loan.
When is a quality of earnings report required?
On initial acquisitions and business expansions with a purchase price of $3 million or more. Owner buyouts, ESOP purchases and owner-occupied special-purpose property are exempt. Seller-prepared reports are not accepted.
Did SBA fees change on October 1, 2026?
Yes. The FY2027 schedule charges 2% to 3.75% of the guaranteed portion on 7(a) loans, with a 0% upfront fee on loans of $700,000 or less to manufacturers, food supply chain businesses and rural businesses, and no SBA fees on 504 loans for the same groups.
Sources
- SBA loan changes coming Oct. 1 mean more paperwork, less lending — Forbes
- Three major SBA announcements, September 2026 — Wisconsin Business Development
- SOP 50 10 8.1 changes effective 1 October 2026 — StatementsReady
- SBA loan rules in 2026: what applies now — Security Banks
- FY 2027 7(a) and 504 program fees — NAGGL
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