SBA SOP 50 10 8.1 Overview: What’s New for Business Valuations and Quality of Earnings
SBA has released SOP 50 10 8.1, effective October 1, 2026. It replaces SOP 50 10 8, and for 7(a) change-of-ownership lending it is a substantial update: the business valuation rules now sit inside a broader financial due diligence framework with new verification duties for lenders, a Quality of Earnings requirement for larger acquisitions, and specific timing rules for PLP processing.
Download the full SOP 50 10 8.1 here: SBA SOP 50 10 8.1.
Below are the seven changes we think matter most for lenders underwriting change-of-ownership deals, along with what each one means in practice.
1. The “Qualified Source” list is now locked in
Every change-of-ownership valuation must be prepared by an individual who regularly receives compensation for business valuations and holds one of five credentials:
- Accredited Senior Appraiser (ASA) – American Society of Appraisers
- Certified Business Appraiser (CBA) – Institute of Business Appraisers
- Accredited in Business Valuation (ABV) – AICPA
- Certified Valuation Analyst (CVA) – NACVA
- Business Certified Appraiser (BCA) – International Society of Business Appraisers
The appraiser must also be independent of the loan production function, uninvolved in approving the transaction, and free of any appearance of a conflict of interest. If your current valuation provider signs under a different designation, this is the time to confirm their credentials line up with the list.
2. The lender orders the valuation, not the broker or the buyer
The valuation must be requested by and prepared for the lender. A report prepared for the applicant or the seller cannot be used, period.
Practically, this puts a premium on early engagement. The scope of work should state whether the deal is an asset or stock purchase and be specific enough that the appraiser knows exactly what is included in the sale, including any assumed debt. The report itself must include the conclusion of value, the appraiser’s qualifications, and a signed certification.
3. The valuation must support the purchase price, and equity fills any gap
The business valuation must support the purchase price regardless of how the debt is structured. If the buyer is paying more than the concluded value, the difference has to come from equity, not additional debt.
That makes the valuation more than a documentation item. It now directly shapes the debt and equity structure of the deal, and a value that comes in under contract price means someone is writing a bigger check.
One nuance worth flagging: when real estate is part of the acquisition, its appraised value is backed out of the contract price to arrive at the Business Purchase Price used for these due diligence rules, including the QoE threshold below.
4. Verifying the appraiser’s inputs is now the lender’s job
Lenders must obtain the financial information the appraiser relied on and verify it against the seller’s IRS transcripts. This creates a direct line between the numbers in the valuation and the numbers the lender has independently confirmed.
Document the verification and keep it in the loan file. A guaranty purchase review is the wrong time to discover the seller’s statements never tied to the transcripts.
5. Quality of Earnings reports required at $3 million and up
For Initial Acquisition and Business Expansion transactions with a Business Purchase Price of $3 million or greater, the lender must obtain a Quality of Earnings (QoE) report in addition to the business valuation. The $3 million test is applied before buyer equity, seller debt, or any other financing source, so structuring the deal to shrink the 7(a) loan does not avoid the requirement. Owner Buyout and ESOP & Cooperative transactions are exempt.
The SOP is specific about what the QoE must contain:
- It must be performed by an independent, experienced financial professional for the benefit of the lender, and may not be prepared by or for the borrower or seller.
- It must reconcile the accountant-prepared financial statements, tax returns, internal statements, and IRS transcript data into a normalized, adjusted earnings figure that reflects recurring, arm’s-length operations.
- It must include a Cash Proof: bank statement activity reconstructed and reconciled to the income statement and tax returns, covering the trailing 12 months and each of the last two fiscal years.
- It must document every add-back and adjustment (non-recurring items, owner compensation, related-party transactions, deferred maintenance, cash-versus-accrual differences) and assess revenue quality, including customer concentration and contract continuity.
- The lender must use the QoE earnings when calculating Debt Service Coverage and retain the report in the credit file.
One helpful note on cost: out-of-pocket due diligence expenses can be passed through to the borrower, and amounts the applicant spends on these reports can count toward the equity injection.
6. Debt is capped by value and must be supported by cash flow
Total debt supporting the transaction, including seller debt that is not on full standby, is limited to the business valuation amount and must be supported by the applicant’s Debt Service Coverage.
Where a QoE is required, its earnings drive the DSC calculation. If the resulting DSC does not support the valuation and the proposed structure, the loan amount comes down and equity makes up the difference.
7. PLP lenders: engage before the SBA Loan Number is issued
Under PLP authority, the valuation and QoE can be completed after the loan number is issued and before closing, provided both were formally engaged when the number was issued. “Formally engaged” means a vendor has been retained and an engagement letter is in place.
If the diligence is not finished at that point, the credit memorandum must carry an estimated business value and later be updated with the completed valuation and QoE findings, including any impact to Debt Service Coverage, purchase price, or the equity structure. (Applications submitted to the LGPC still require the valuation with the application itself.)
A question we keep hearing: what about the buyer’s existing QoE?
The SOP text says the QoE may not be prepared by or for the borrower or seller. SBA training on 8.1 from August 2026, however, indicated that a buyer’s QoE and a reliance letter from its provider may be furnished to the lender, with the lender then engaging its own QoE professional to review the work and determine whether the report can be relied upon.
Two cautions there. Most buyer-side QoE reports include non-reliance language, so reliance has to be specifically extended by the original provider. And a review that surfaces gaps may still end in a new report. Expect further guidance as lenders start applying the new SOP; we track these developments and will update this post as SBA clarifies.
How BGH Valuation Services can help
We built our practice around exactly this framework. BGH provides both the business valuation and the QoE under a single engagement: one point of contact, one consolidated data request to the borrower, and the same normalized earnings figure carried through both reports, so there is no reconciliation gap between two firms.
Our team holds CVA, CPA (inactive), CFA, and CMEA credentials with prior audit experience: the “independent, experienced financial professional” the SOP requires. Every report receives a concurring review by a second credentialed appraiser before it goes out, and our fees are fixed, never contingent. For PLP lenders, we can have an engagement letter in place quickly so the file is compliant the day the SBA Loan Number is issued. And if a buyer hands you their own QoE, we perform the lender-side review described above and document a conclusion for your credit file.
If you are updating credit policy ahead of October 1, or if you have a live deal that will close under the new rules, reach out to our team today.
Frequently asked questions
When does SOP 50 10 8.1 take effect?
October 1, 2026. It replaces SOP 50 10 8 and applies to 7(a) and 504 lending; the changes summarized here concern 7(a) change-of-ownership transactions.
Who can prepare a business valuation under SOP 50 10 8.1?
An individual who regularly receives compensation for business valuations and holds an ASA, CBA, ABV, CVA, or BCA credential, is independent of loan production, and is not involved in approving the transaction.
When is a Quality of Earnings report required?
For Initial Acquisition and Business Expansion transactions with a Business Purchase Price of $3 million or more, measured before buyer equity, seller debt, or other financing sources (and after backing out appraised real estate). Owner Buyout and ESOP & Cooperative transactions are exempt.
What is a Cash Proof?
A financial analysis that reconstructs cash receipts and disbursements by reconciling bank statement data to the income statement and tax returns. Under 8.1 it must cover the trailing 12-month period and the last two fiscal years.
Can the borrower pay for the valuation and QoE?
Yes. Out-of-pocket costs for the financial due diligence reports may be passed on to the borrower, and funds the applicant spends on them can count toward the equity injection.