What changes, in one table
SOP 50 10 is the SBA's standard operating procedure for lenders: the rulebook that tells a bank how to decide eligibility, underwrite and close a 7(a) or 504 loan. Version 8 has been in force since 1 June 2025. Version 8.1 will take effect on 1 October 2026.
Debt service coverage, under 8.1, will be EBITDA divided by the combined debt service the business will carry once the transaction is done. Combined means the new SBA loan plus every other business loan that survives closing. The table follows Pioneer Capital Advisory's summary of the rule.
| SOP 50 10 8 (since 1 June 2025) | SOP 50 10 8.1 (from 1 October 2026) | |
|---|---|---|
| Expansion loan | 1.15x | 1.15x |
| Business acquisition | 1.15x | 1.25x |
| Owner or partner buyout | 1.15x | 1.25x |
| ESOP transaction | 1.15x | 1.25x |
| Cash flow basis | Projections allowed | Historical or adjusted historical only |
| 7(a) Small Loans | 1.10x plus two months of bank statements, since 1 March 2026 | Unchanged |
The 504 program has its own coverage rules and this change is written for 7(a). Ask your certified development company what applies.
Who this lands on
Expansion borrowers, the owner adding a second location or a new fleet, will see no change to the floor. Buyers will. Anyone acquiring a business, buying out a partner, or setting up an ESOP with 7(a) money will need $1.25 of historical cash flow for every $1.00 of post-close debt service, with no forecast to close the gap. Franchisees buying an existing unit from a departing operator, search fund buyers, and an owner buying a partner out at retirement are all in that group.
The pool is large. The SBA reported 77,600 7(a) loans worth $37 billion in fiscal 2025, alongside 6,750 loans of $7.8 billion under 504. The release does not say how many of those were acquisitions, so we cannot tell you how many buyers the change will touch, only that the number is not small.
What "adjusted historical" lets you add back
Adjusted historical cash flow is the seller's actual past results with specific, documented items added back or taken out, to show what the business will produce under the new owner and the new debt. The past is the starting point. The adjustments are the argument.
The adjustments lenders generally accept are the ones you can prove from the seller's books: the seller's own compensation above what you will pay a replacement, personal expenses run through the business, genuine one-time costs, and rent that will change under a new lease. Each needs a document behind it, and the lender decides what it will accept. What you cannot add is the revenue you plan to win, which is the point of the change.
How a bank will compute it from your files
Take a buyer acquiring a 31-person landscaping company. The seller's trailing twelve months in QuickBooks Online show net income of $218,000, interest of $9,400 and depreciation of $47,100. Tax is paid on the seller's return, so there is no tax add-back. EBITDA is $274,500.
The add-backs, each with a payroll record or invoice behind it: the seller paid herself $165,000 and the buyer will pay a general manager $110,000, so $55,000 comes back; a $12,300 legal settlement in March was a one-time cost; and $9,600 of personal vehicle lease went through the books. Adjusted EBITDA is $351,400.
Now the other side. The new 7(a) loan is $1,850,000 over ten years, and the amortization schedule shows $272,300 of principal and interest in year one. The buyer's existing company has an equipment note with $23,900 of annual payments that survives closing, so it is combined in. Post-transaction debt service is $296,200.
Coverage is $351,400 divided by $296,200, or 1.19x. Under the current SOP that passes. From 1 October it will not, and no projection can be used to say the buyer will grow revenue 12% and make up the difference. To reach 1.25x, combined debt service has to fall to about $281,100, roughly $15,100 less a year, which at that loan's terms means borrowing about $102,000 less. The choices are a price reduction, more buyer equity, or a seller note structured so the lender does not count its payments in year one. The arithmetic for a single company is in debt service coverage ratio for business owners.
The bank will also reconcile the seller's QuickBooks P&L to the filed tax return. If the two disagree, the return wins.
After closing, the reporting does not stop
ClearlyAcquired's timeline of SBA post-closing requirements describes what most lenders ask for. Within 90 to 120 days of fiscal year end, an annual package: business tax returns, balance sheet, P&L, cash flow statement, personal returns for anyone holding 20% or more, and a personal financial statement on Form 413. Quarterly P&L and balance sheet are typical. Some lenders want monthly in year one. The lender files the settlement sheet, Form 1050, within 45 days. Many loan agreements also carry a 1.25x maintenance covenant, tested every year on the numbers you send.
The Federal Reserve's 2026 Small Business Credit Survey of 6,525 employer firms found 59% of those with debt had given a personal guarantee and 51% had pledged business assets. An SBA loan will almost always be one of them, which is why the bank builds a global cash flow across every company you own and your personal return.
Navigator's Pro plan tracks breakeven and coverage against the loan terms you enter, per entity and consolidated, from a read-only connection to each QuickBooks Online file, so the annual review is a number you have already seen twelve times. Pro's one-click lender filing pack assembles the statements a lender asks for (some pack formats are still marked coming soon). Covenant monitoring with a named CFO is in the CFO plan. Details are on the pricing page.
What to do in the next two weeks
If you have a deal in progress, ask your lender which SOP your application will be underwritten under. The honest answer is that it depends on where the file sits on 1 October, and only the lender knows. If the answer is version 8, get it in writing, and ask what happens to the file if closing slips past the date.
The common advice this month is to get the offer in before the deadline and beat the rule. We would be careful with that. A deal that clears 1.15x only with projections is a deal that only works if the plan comes true, and the new floor is a reasonable test of whether it should be done at all.
Either way, the work is the same. Get the seller's books to a state where the P&L ties to the return. Document every add-back with a record. Compute your own combined debt service, including every loan across every entity you own, because the bank will. And read the draft loan agreement for the maintenance covenant and the reporting schedule before you sign, since covenant compliance is where the next five years of this loan are lived.
Questions owners ask
What DSCR does the SBA require in 2026?
Under SOP 50 10 8, standard 7(a) loans need 1.15x, and small 7(a) loans have needed 1.10x plus two months of bank statements since 1 March 2026. From 1 October 2026, SOP 50 10 8.1 will keep 1.15x for expansion loans and require 1.25x for acquisitions, owner buyouts and ESOP transactions. Your lender may set a higher floor.
Can I use projections for an SBA loan?
For 7(a) loans underwritten from 1 October 2026, no. SOP 50 10 8.1 will require coverage to come from historical or adjusted historical cash flow. Documented adjustments to the past are allowed, such as a seller's above-market salary; forecast growth is not. A deal that only works on projected numbers will need more equity, a lower price, or a different structure.
What is SOP 50 10 8.1?
SOP 50 10 is the SBA's standard operating procedure for lenders making 7(a) and 504 loans: the rulebook for eligibility, underwriting and closing. Version 8 took effect on 1 June 2025. Version 8.1 will take effect on 1 October 2026 and will change how coverage is measured for acquisition loans, dropping projections and raising the floor to 1.25x.
What financial statements will my SBA lender ask for after closing?
Expect an annual package within 90 to 120 days of fiscal year end: business tax returns, balance sheet, P&L, cash flow statement, personal returns for owners of 20% or more, and a personal financial statement. Quarterly P&L and balance sheet are common, monthly in year one for some lenders, and many require you to maintain 1.25x coverage.
Related
For the formula and how to track it monthly, start with debt service coverage ratio for business owners. When the bank looks past the acquired company to everything else you own, global cash flow analysis explains what it builds. For the years after closing, loan covenants and lender reporting covers what you have promised to keep sending.
If you would like a second pair of eyes on whether your books are lender-ready before an SBA application, the free accounting health check takes a few minutes: navigatorhq.ai/health-check.
Published . Last updated . Reviewed by a CFO on the Navigator team.