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SBA 7(a) acquisitions

SBA Quality of Earnings, scoped to the lender’s requirements.

For buyers whose business purchase price reaches $3 million, and for the lender on their file. For applications SBA receives on or after 1 October 2026, we prepare the quality of earnings report the lender must obtain, or, where your lender has approved us as one of its vendors, review the report you already hold. One fixed fee; the report in 15 business days. Buyers financing an acquisition at $3 million and above start here; owners raising equity or refinancing start on the Capital Readiness page.

We confirm the requested deliverables, who will commission and review the report, and the lender’s acceptance process before work begins. A report is not automatically accepted by every bank or program.

The rule

When the rule reaches your deal, and what the deal has to clear.

$3 million

Business purchase price

Measured before buyer equity and seller debt, with owner-occupied real estate taken out at its appraised value. The mandatory Quality of Earnings requirement depends on the transaction type, applicable purchase-price threshold and current SBA guidance. Transactions outside that specific requirement may still require financial diligence or additional review under the lender’s underwriting process.

1 October 2026

Applications SBA receives from this date

SOP 50 10 8.1, Appendix 15, covers Initial Acquisitions and Business Expansions. Owner buyouts, ESOP and cooperative transactions, and an owner-occupied special purpose property at any price sit outside the rule.

1.25x

Debt service coverage

An Initial Acquisition must clear 1.25x on the report’s adjusted earnings; a Business Expansion clears 1.15x. If coverage does not support the valuation and the proposed debt structure, the loan amount must be reduced, and additional equity may make up the difference.

Both routes to the lender’s file

SOP 50 10 8.1 · Appendix 15

Step 1

Is the deal an Initial Acquisition or a Business Expansion?

Yes, continue
If no

Owner buyout, ESOP or cooperative transaction, or an owner-occupied special purpose property: this particular mandatory-QoE requirement may not apply, and the lender’s other diligence and underwriting requirements still govern. Confirm the applicable requirements with the lender.

Step 2

Is the business purchase price $3 million or more?Real estate out at appraised value; before equity and seller debt.

Yes, continue
If no

This particular mandatory-QoE requirement may not apply, and the lender’s other diligence and underwriting requirements still govern. Confirm the applicable requirements with the lender.

Step 3

Who commissioned the report?

The lender

Route 1. The lender’s own engagement, conducted for its benefit. Coverage runs on the report’s earnings.

The buyer

Route 2. Usable if the lender elects to have one of its approved vendors review it. The findings of that review sit in the file beside the report.

The seller

Cannot be the lender’s report: the SOP bars a report prepared by or for the seller.

Where we sit

Route 1: the lender engages us and the report is addressed to the lender. Route 2: where the lender has approved us as one of its vendors, we review another firm’s report and give the lender written findings for its file.

Source: SOP 50 10 8.1, Appendix 15, Para. C.1, text of 25 September 2026.

Both routes

The lender orders the report, or one of its vendors reviews yours.

Until 25 September the SOP barred a report prepared for the borrower as well as the seller; the technical update narrowed that bar to the seller and opened the vendor-review route. SBA’s notice announcing the 25 September update also mentions a reliance letter; the SOP text describes only the vendor review, and a lender is entitled to follow the SOP. Ask your lender which route it will take before you commission anything, because the answer decides who engages us and whom the report is addressed to.

From the filed return to the adjusted figure

Illustrative · $ in thousands

Ordinary business income of $416,500 on the FY2025 return walks to Adjusted EBITDA of $1.11 million.

StepBasisTickAmount
Income per federal returnForm 1120-S, line 21T416.5
Schedule M-1 differences, netSchedule M-1, recomputedR68.0
Net income per booksTies to the internal profit and loss statementA484.5
Interest and depreciationGeneral ledger and fixed-asset registerA212.0
EBITDA as reportedRecomputedR696.5
Tested add-backsAdd-back schedule, FY2025 portionV413.6
Adjusted EBITDA, FY2025Reported plus tested add-backsR1,110.1
Adjusted EBITDA, trailing twelve months833.5 reported plus 413.6 tested1,247.1
T agreed to the filed tax return·R recalculated·A agreed to the trial balance or general ledger·V vouched to the source document

Every line down to EBITDA as reported is a filed or ledger figure, and each add-back is vouched to its source, so a reader who disagrees with a judgment on a later page can still rely on this one.

3 of 3

FY2024, FY2025 and the trailing twelve months tie to the bank within 1 percent

Hoosier Supply Co. is our sample company. Exhibits 1.1, 1.2 and 2.1 of the sample Exhibit Book.

What the lender receives

One report, built to Appendix 15, addressed to the lender.

The report reconciles the accountant-prepared statements, the tax returns, the internal statements and the IRS transcripts to one adjusted earnings figure. It carries the Cash Proof over the trailing twelve months and the last two fiscal years, documents every add-back with the items we declined shown, and closes with a one-page summary that walks adjusted earnings to debt service coverage. The Financial Exhibit Book and the client Excel workbook come with it.

Ryan Anoskey, CPA, leads the engagement and Jared Luegers, CFA, performs the documented second review. LIMESTONE issues and signs the report, and we hold one role on a transaction.

Lender-commissioned report · fee by business purchase price

Fixed · quoted in writing

$3.0M to $5.0M$15,000
Above $5.0M to $10.0M$20,000
Above $10.0M$25,000 and up

Adjustments

Delivery inside 10 business days+$3,500
Complex fileSeveral entities, cash-heavy books or intercompany activity+$2,500
Review of a report another firm prepared, where the lender has approved us as a vendorWritten findings for the lender’s fileQuoted at scoping
Report you commission for your lender’s vendor reviewLite is built for deals with no lender relying on the reportCore or Full, priced on the Quality of Earnings page

These fees are for the report a lender commissions under the SBA rule; a Quality of Earnings for a buyer or an owner is priced by tier on the Quality of Earnings page. Standard delivery is 15 business days from Day 1. The fee does not depend on the findings or on whether the loan closes.

Fee and timing

One fixed fee by business purchase price, 15 business days from Day 1.

The fee is quoted in writing after a scoping call. SBA lets the lender pass it through to the borrower, and what the borrower spends on the report can count toward the equity injection. Under delegated (PLP) processing the report must be formally engaged, with an engagement letter in place, by the time the SBA loan number is issued, so Day 1 matters: it is the later of cleared payment and the last critical item on our request list. Lenders onboarding LIMESTONE as a vendor can write to either of us.

Questions

Three questions buyers and lenders ask first.

The longer answers are in who orders the QoE on an SBA deal, what the SOP leaves out and what a deal under $3 million needs. Everything else about the report itself is on the Quality of Earnings page.

Who can prepare a quality of earnings report for an SBA 7(a) loan?

The SOP asks for an independent, experienced financial professional working for the benefit of the lender, and bars a report prepared by or for the seller. It names no credential and no provider list. In its Appendix 15 lender training, posted 28 August 2026, SBA’s presenter described a stricter standard than the written text: no affiliation with an advisory firm on either side of the deal or any agent involved. The SOP text does not contain that standard. At LIMESTONE a CPA leads every Quality of Earnings engagement.

What if the purchase price is just under $3 million?

The rule does not attach, and the lender still owes financial due diligence on every change of ownership. Check the measurement first: the threshold is the business purchase price before your equity and any seller note, with owner-occupied real estate removed at its appraised value. A $3.6 million deal carrying a $900,000 building is a $2.7 million business; a $3.4 million business bought with $1 million down is a $3.4 million deal.

What happens if the report comes back below the agreed price?

The lender must run coverage on the report’s earnings, and if coverage does not support the valuation and the proposed structure, the loan amount must be reduced. The difference can come in as additional equity, from the buyer or from a limited source such as more seller debt, and any limited source that fills it goes on full standby for the term of the loan.

Get started

Engage the report early.

Bring the deal as it stands. If you are a buyer with a report in hand and a lender who has not seen it, we will go through scope with you on a short call. If you are a lender writing your quality of earnings procedure, put us on your hardest file first. Or write to either of us below, and the call starts at the numbers.

Ryan Anoskey, CPA · Partner · ryan.anoskey@limestonesp.com

Jared Luegers, CFA · Founder and Managing Partner · jared@limestonesp.com