What are the SBA 7(a) rules for buying a business, as of October 2026?

Which version of the rules applies to my loan?

• SOP 50 10 8 took effect June 1, 2025. It ended the earlier zero-down approach and made partial changes of ownership eligible.
• SOP 50 10 8.1 was issued August 14, 2026. It applies to loans that receive an SBA loan number on or after October 1, 2026. Change-of-ownership rules are in its Appendix 15.

The date that matters is when your lender obtains the SBA loan number, not when you signed the letter of intent. Ask your lender which SOP your file is under.

Equity and seller financing rules

1. Four categories. Initial Acquisition, Business Expansion, Owner Buyout, ESOP/Cooperative. The category sets coverage, whether the injection can be reduced and whether a QoE is required. Change: new in 8.1.
2. Equity injection. At least 10% of total project costs: price plus working capital, fees and closing costs. Not reducible for an Initial Acquisition. For a Business Expansion or Owner Buyout, the lender may reduce or waive it with strong liquidity and positive net worth. Change: the pre-June-2025 zero-down approach is gone.
3. Limited sources. A seller note on full standby (no principal or interest for the life of the SBA loan), other standby debt, and passive minority investors under 20% in aggregate may together supply no more than half of the injection.
4. Minority investors. If their equity counts toward the injection, they generally receive only tax distributions until the SBA loan is repaid.
5. Seller notes not on standby. Included in debt service coverage at a maximum 10-year amortization.
6. Refinancing a seller note. Change, as reported (not from SOP text): seasoning before refinance rose from 24 to 36 months.
7. Earnouts. Seller earnouts are prohibited in SBA-financed acquisitions.
8. Partial change of ownership. Eligible. Must be a stock or membership-interest purchase. A seller who keeps equity gives a full personal guaranty for at least 2 years after disbursement. Change: eligible since SOP 50 10 8, June 1, 2025.
9. Seasoned funds. Injection money must be in the account about 30 days or documented as to source.

Underwriting rules

1. Debt service coverage. 1.25x for Initial Acquisition and Owner Buyout; 1.15x for Business Expansion. Measured on historical or adjusted historical cash flow (last fiscal year or average of the last two). Projections cannot be used. Change: SOP 50 10 8 had a single 1.15x floor and allowed projections.
2. Independent valuation. Required on every change-of-ownership loan. Total debt is capped at the appraised value. Any gap between price and valuation comes from buyer cash.
3. Quality of earnings. A lender-commissioned independent QoE is required for Initial Acquisitions and Business Expansions with a purchase price of $3 million or more, excluding owner-occupied real estate. QoE earnings are used in the coverage calculation. Not required for Owner Buyouts or ESOPs. Status: an 8.1 rule, set by category.
4. Small loans. The streamlined "7(a) Small" path no longer applies to change-of-ownership loans of any size. Small loans now get a repayment analysis that includes the two most recent months of bank statements. Change: change-of-ownership loans lost the streamlined path.
5. Seller transition. The seller may stay as a consultant or employee up to 24 months in aggregate after closing. Change: was 12 months.

Eligibility, guarantees, caps and terms

1. Citizenship. Effective March 1, 2026, only businesses owned by U.S. citizens or U.S. nationals with a U.S. principal residence. Change: lawful permanent residents are no longer eligible.
2. Personal guarantees. Owners of 20% or more guarantee. Trusts must guarantee at any ownership percentage, and the trustor must guarantee personally.
3. Business Expansion. No reduction in full personal guarantors. Lenders typically look for the same or a related industry and two full fiscal years under current ownership.
4. Caps. 7(a) maximum of $5 million per borrower including affiliates. Combined 7(a) and 504 capacity of $10 million.
5. Terms. Business portion: maximum 10-year amortization. Real estate: up to 25 years. Change: 8.1 removed the blended 25-year amortization on mixed deals.
6. Franchises. Must be on the current SBA Franchise Directory.
7. Rates and fees. As of September 2026, with prime at 7%, the maximum variable rate for loans over $350,000 was prime plus 3%, or 10%. The FY2026 guarantee fee for loans over 12 months: 2% of the guaranteed portion up to $150,000; 3% from $150,001 to $700,000; 3.5% from $700,001 to $5 million on the guaranteed portion up to $1 million, plus 3.75% above. Check current prime.

How do the rules apply to one deal? A worked example

A first-time buyer agrees to a $3,200,000 price. Working capital is $150,000 and fees and closing costs are $90,000 (illustrative). Rate 10%, 10-year amortization.

1. Total project costs: $3,200,000 + $150,000 + $90,000 = $3,440,000.
2. Minimum injection: 10% x $3,440,000 = $344,000. Not reducible, because this is an Initial Acquisition.
3. Most that a standby seller note and passive investors can supply: $344,000 / 2 = $172,000.
4. SBA loan: $3,440,000 - $344,000 = $3,096,000, under the $5 million cap.
5. Annual debt service: about $491,000.
6. Historical cash flow needed at 1.25x: about $613,700. Under the old 1.15x floor it would have been about $564,600, a difference of about $49,100 a year.
7. QoE: required, because the price is $3 million or more. The lender uses QoE earnings, not the seller's figures, in the coverage test.
8. Valuation: if the appraisal comes in at $3,000,000, total debt cannot exceed $3,000,000. Equity rises to $3,440,000 - $3,000,000 = $440,000, which is $96,000 more cash.

Where these numbers come from: Rules are from SBA SOP 50 10 8 and SOP 50 10 8.1 as summarized by Beancount, Cantrell Law, FunderIntel and Starfield & Smith; partial changes of ownership from Starfield & Smith; program basics from the SBA. Rates and fees are from NerdWallet. Confirm current terms with an SBA lender. SOP 50 10 8.1 applies to loans numbered on or after October 1, 2026; lender practice under it is still settling, and the summaries above are secondary sources.

Related questions

Can I still use projections to qualify?

No. As of October 2026, coverage is measured on historical or adjusted historical cash flow. SOP 50 10 8 allowed projections; 8.1 does not.

Can a green card holder get an SBA acquisition loan?

Not since March 1, 2026. SBA loans are limited to businesses owned by U.S. citizens or U.S. nationals with a U.S. principal residence.

Is a seller earnout allowed?

No. SBA rules prohibit seller earnouts in SBA-financed acquisitions. A fixed seller note is the usual substitute.

What if my deal is a second acquisition?

It may be a Business Expansion: 1.15x coverage and an injection the lender may reduce. See Can I use an SBA loan to buy a second business?

What comes next

With the rules in hand, see how a loan moves from application to closing: How does an SBA loan to buy a business work? The buyers who end up with the most valuable companies decide what the business goes into before they buy it, because the $5 million cap counts every affiliate.

Related articles

• How does an SBA loan to buy a business work?
• Can a seller note count toward the SBA 10% down payment?
• How much will a bank lend to buy a business?
• Can I avoid the personal guarantee on an SBA loan?
• How do you build a holding company for acquisitions?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.