SOP 50 10 8.1 change-of-ownership rules, explained section by section
Short answer
SOP 50 10 8.1, effective for 7(a) applications issued an SBA loan number on or after October 1, 2026, moves every change-of-ownership rule into Appendix 15. It sorts deals into four types (Initial Acquisition, Business Expansion, Owner Buyout, ESOP and Cooperative), requires a lender-ordered valuation by a credentialed Qualified Source (with a lender-valuation option at a Business Purchase Price of $350,000 or less in the version with technical updates), adds a Quality of Earnings with a cash proof at $3 million, caps debt at the valuation, and sets equity, DSC, term and collateral rules by type.
SBA rewrote its acquisition rules for fiscal 2027. Before, change-of-ownership guidance was spread across the 7(a) chapters; now it's consolidated in Appendix 15 of SOP 50 10 8.1, which says that if any other section of the SOP conflicts with it, the Appendix governs. SBA's own explanation is that changes of ownership have grown into one of the largest categories of 7(a) lending and carry risks other loans don't. This guide walks through Appendix 15 in its own order: general requirements, transaction types, uses of proceeds, loan terms and credit standards.
We read the version with technical updates posted on SBA's SOP page (effective October 1, 2026) and compared it with the August 14, 2026 issuance. Where they differ, we say so.
Scope and timing
- SOP 50 10 8.1 applies to applications issued an SBA loan number on or after October 1, 2026, regardless of when the LOI was signed. Earlier applications stay on 8.0.
- It covers all 7(a) delivery methods, including 7(a) Small and SBA Express, which are permitted for acquisitions but subject to Appendix 15.
- SBA's notice says application forms are being updated; until then lenders collect required information under existing forms and keep it in the file.
A. General requirements
What counts as a change of ownership
A stock purchase (including redemption) or an asset purchase of all or substantially all of a business's assets where the buyer continues the seller's operations. Without continuity, the lender may treat it as a start-up and apply start-up rules. The change must promote the sound development or preserve the existence of the small business, and the small business must be the borrower or a co-borrower.
Business Purchase Price
The price in the purchase agreement minus the appraised value of owner-occupied commercial real estate in the deal. The lender enters it in SBA's system. All due diligence thresholds use it, independent of total project cost, buyer equity or seller debt.
Debt, valuation and QoE
- Total debt supporting the deal, including seller debt not on full standby, is limited to the business valuation and must be supported by DSC.
- When a QoE is required, its findings drive the DSC; if DSC doesn't support the valuation and structure, the loan is reduced.
- Intangibles (goodwill, customer lists, IP, non-competes) can be financed if the Para. C.1 due diligence is met.
- Seller financial data is verified against IRS tax transcripts.
Seller terms
- Earnouts are prohibited. Buyer rebates are allowed and must pay down principal (no subsidy recoupment fee). Working capital true-ups aren't rebates.
- Seller exit: in Initial Acquisitions and Business Expansions the seller can't remain as officer, director, stockholder or employee; consulting allowed up to 24 months total. Partial changes and ESOP/cooperative deals are exceptions.
Documentation
All purchase agreements with schedules and amendments; underwriting of all other debt and equity; a documented site visit to the applicant and the target (with an alternative for e-commerce); a commercial appraisal for any real estate (which must be a separate loan or blended, unless the special purpose exemption applies); and liens on all acquired assets including transferable licenses.
B. Four transaction types
| Initial Acquisition | Business Expansion | Owner Buyout | ESOP & Coop | |
|---|---|---|---|---|
| Minimum equity | 10%, can't be reduced | 10%, may be reduced | 10% of price, may be reduced | None for ESOP 51%+ |
| Minimum DSC | 1.25x | 1.15x | 1.25x | 1.25x |
| QoE at $3M+ | Yes | Yes | No | No |
| Seller stays? | No (24-mo consultant) | No (24-mo consultant) | Partial change: yes | Yes |
Notable details: in Initial Acquisitions by a person, the person and the business are co-borrowers and sign the note jointly and severally. Business Expansions must keep at least as many full personal guarantors as before. Partial changes make every new owner a co-borrower (even at 1%), require indirect owners to guarantee, and require a selling owner keeping under 20% to give a full two-year guaranty. Multi-step partial changes through a new holding entity are ineligible. More in the four transaction types.
Personal guaranties
Guaranty percentages use post-sale ownership (except the selling-owner rule). The ESOP seller who keeps a stake must give a full unlimited guaranty; that's statutory.
C. Uses of proceeds
- Refinancing: debt that financed a change of ownership is eligible; seller notes only after 36 months in place and current (not standby), meeting the 10% payment-improvement test without reducing lender exposure. Paying off the seller's debt in an Initial Acquisition is part of the transaction, not a refinance.
- Allowed: working capital; borrower out-of-pocket costs including valuations and QoE; owner-occupied real estate on a blended basis.
- Restricted: payments to associates except as allowed for partial changes. EPCs can only finance changes between existing EPC owners where the property has been held 36 months.
D. Loan terms
No balloons. Maximum 10-year amortization for changes of ownership. With real estate: separate loans (including 504) or a blended weighted-average maturity where only the real estate share exceeds 10 years (up to 25), calculated before equity. Special purpose property exemption: up to 25 years when 85%+ of total project cost is real estate integral to the business. A portion of working assets can be funded on a line of credit under the line-of-credit rule.
E. Credit standards
Business valuation
Required on every change of ownership, as part of primary underwriting. The Qualified Source must regularly receive compensation for business valuations, hold ASA, CBA, ABV, CVA or BCA, be independent of loan production, not be involved in approval and have no appearance of conflict. The valuation is requested by and prepared for the lender; the scope states asset vs stock and what's included (including assumed debt); the report includes the conclusion of value, qualifications and signed certification. It must support the Business Purchase Price; any excess is equity. The lender obtains the appraiser's source data and verifies it against IRS transcripts.
Version note. The technical-updates version says that for non-special-purpose and special purpose properties alike, if the Business Purchase Price is $350,000 or less the lender may perform its own valuation unless there's a close buyer-seller relationship. The 7(a) Small and Express chapter repeats the $350,000 internal option. The August 14 issuance had no such option. Check which version a summary you're reading is based on.
Special purpose property valuations must allocate value among land, building, equipment and intangibles and be performed by a Certified General Real Property Appraiser with at least four going-concern appraisals of equivalent special-use property in the last 36 months, under USPAP.
Quality of Earnings
Initial Acquisitions and Business Expansions at a Business Purchase Price of $3 million or more. Independent, experienced financial professional; for the lender's benefit; not prepared by or for the seller. A buyer's own QoE can be reviewed by the lender's approved vendor instead. It must reconcile accountant-prepared statements, tax returns, internal financials and IRS transcripts into normalized earnings; include a cash proof for the trailing 12 months and last two fiscal years; document every add-back; and assess revenue quality including customer concentration and contract continuity. See the QoE requirement.
Equity
Based on total project cost (excluding lines of credit and 504 loans); Owner Buyouts on purchase price. Unlimited sources: unborrowed cash including gifts, personal loans repaid from outside the business, non-repayable grants, verified prepaid expenses. Limited sources (max half): standby debt, full-standby seller debt, minority investors under 20% with no control. Agent, advisory and education fees aren't equity. Waivers (Expansion, Owner Buyout) require liquidity, no negative net worth, and no dedicated working capital in a 7(a) term loan for 90 days. See equity rules.
Credit analysis and DSC
Three years of historical financials at the best available level, interims, transcript verification. Historical DSC = EBITDA ÷ post-transaction debt service, using the last FYE or two-year average: 1.25x (1.15x expansions). Prudent adjustments must be justified; owner-comp adjustments need global cash flow at 1:1. Projections are evaluated but can't meet DSC, except for owner-occupied special purpose property fully collateralized by appraised value (DSC within two years; no QoE required). Interest-only additional debt is tested at no more than 10-year amortization. The memo also covers pro forma balance sheet, ratios, 12-month working capital, collateral, insurance, credit elsewhere, 50%+ working capital, competition, delinquencies, citations, litigation and franchise information.
Collateral
Fully secured: liens on available fixed assets at adjusted values (used M&E 50% NBV or 80% OLV; improved real estate 85%; unimproved 50%; F&F 10%; A/R and inventory 10%). Vehicles liened only over $20,000 without existing liens. Shortfall: available equity in personal real estate of co-borrowers, 20%+ owners and guarantors, limited to the shortfall and 150% of equity; not required under 25% equity. No piggyback structures. Lines of credit with first lien on trading assets must apply 20% to 50% of day-one availability to the purchase.
What this means in practice
For lenders, the valuation and QoE are no longer just inputs to the credit memo; they set the ceiling on the loan. That makes the quality of the order (scope, assets included, assumed debt) and the independence of the provider matter more than before. For buyers, it means pricing on verified earnings from the start, since anything above the valuation is equity and the QoE can cut the loan. Our guides for ordering a valuation, reviewing one and writing the credit memo go deeper.
This summary isn't a substitute for the SOP. Lenders should work from the current SOP and any notices issued after October 1, 2026.
Buyers reading the same rules from their side can use OKtoBuy's summary of the 2026 SBA rules for buying a business.
Common questions
When does SOP 50 10 8.1 apply?
To 7(a) and 504 applications issued an SBA loan number on or after October 1, 2026. Applications submitted through September 30, 2026 used SOP 50 10 8.0.
Does every change of ownership now need an independent valuation?
The August 2026 issuance removed the old in-house option, and many summaries say so. The version with technical updates on SBA's site lets the lender perform its own valuation when the Business Purchase Price is $350,000 or less and buyer and seller aren't closely related. Above that, a Qualified Source is required.
Which deals need a Quality of Earnings report?
Initial Acquisitions and Business Expansions with a Business Purchase Price of $3 million or more, measured before equity and seller debt. Owner Buyouts, ESOP and Cooperative deals, and owner-occupied special purpose property acquisitions are exempt.
Can the lender rely on a buyer's QoE?
Only after one of the lender's approved vendors reviews it; the review findings go in the file with the original report.
What happens if the QoE earnings don't support the deal?
The lender must use QoE earnings in the DSC calculation. If DSC doesn't support the valuation and structure, the loan must be reduced; additional equity can make up the difference.
Related guides
Sources
This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.