For SBA 7(a) credit teams
Quality of Earnings reports for SBA 7(a) lenders
We are a CPA firm that writes Quality of Earnings reports on business acquisitions, engaged by the lender rather than by the buyer or the seller. Two weeks from a complete file, and we can run several engagements at once.
Lender engaged
Every report is engaged by the bank, never by the buyer or the seller
2 weeks
From a complete file to your written report
250+
Quality of Earnings engagements completed, led by a CPA
Reference
The requirement, precisely
For credit teams who want the language in one place, this is what the rule says.
The document
SOP 50 10 8.1, Appendix 15, issued August 14, 2026. SOP 50 10 8.0, the version in force until then, contains no QoE requirement at all.
Effective for
Applications that receive an SBA loan number on or after October 1, 2026. The trigger is the date the loan number issues, not the application date and not the closing date.
Transactions in scope
Initial Acquisition and Business Expansion.
Transactions not in scope
Owner Buyout and ESOP & Cooperative transactions are not subject to the QoE requirement, at any size.
Threshold
A Business Purchase Price of $3 million or more. Measured before buyer equity, seller debt or other financing, and excluding owner-occupied commercial real estate at appraised value. It is not the loan amount.
Who may perform it
An independent, experienced financial professional. It must be conducted for the benefit of the Lender, and it may not be prepared by or for the borrower or seller.
What the Lender does with it
Uses the QoE earnings in the Debt Service Coverage determination, and retains the QoE report in the credit file.
Program
7(a) change of ownership. There is no QoE requirement in 504.
Also new in Appendix 15, on the same effective date
- Debt Service Coverage rises to 1.25x on Initial Acquisition and Owner Buyout, and 1.15x on Business Expansion, and it cannot be met on projections alone.
- Total debt supporting the transaction is capped at the business valuation amount. Any price above value must be covered by equity on full standby.
- If the QoE earnings do not support the price, the loan must be reduced.
- Seller earnouts are prohibited, and seller debt cannot be refinanced for 36 months.
- An independent business valuation is now required on every change of ownership, not only above a threshold.
We do not perform business valuations. Appendix 15 requires an accredited qualified source for that and we are not one.
Independence
Your buyer's QoE will not satisfy this
Appendix 15 states the report must be performed by an independent, experienced financial professional, must be conducted for the benefit of the Lender, and may not be prepared by or for the borrower or seller. That single sentence disqualifies most of the reports already circulating in these files.
What does not satisfy the requirement
A report the buyer commissioned, however thorough. It was prepared for the borrower.
A sell-side report handed over in the data room. It was prepared for the seller, and those reports are usually reliance restricted on every page.
A buyer's report re-addressed to the Lender after the fact. A change of client is a new engagement with new procedures and a new report. It cannot be relabeled.
How we are engaged instead
The engagement letter names the Lender as the client. The Lender is the only party that instructs us and the only party the report is addressed to.
If the buyer already ran a report, we can work from their data room to move faster. The report in your credit file still has to be ours, to you.
We run a conflict check on the buyer, the seller, the target and the intermediary before we accept. No success fee, and no interest in whether the transaction closes.
Scope
Appendix 15 scope, mapped line by line
The left column is the requirement. The right column is what arrives in your credit file. This is the page worth forwarding to whoever is writing your procedure.
Reconcile accountant-prepared financial statements, tax returns, internal financial statements and IRS transcript data to produce a normalized, adjusted earnings figure that reflects recurring, arm's-length operations.
One reconciliation that ties all four sources to a single adjusted earnings figure, with every difference identified and explained rather than netted. IRS transcript authorization goes out with the engagement letter, so the transcripts are not the item that holds up delivery.
A Cash Proof reconstructing cash receipts and disbursements against bank statements, the income statement and the tax return, performed on both a trailing twelve month basis and the last two fiscal years.
Three separate cash proofs every time: trailing twelve months, plus each of the last two fiscal years. Not sampled. This is the procedure that surfaces unreported receipts and undisclosed disbursements, and it is the one most often cut short elsewhere.
Documentation of all add-backs, including non-recurring items, above or below market owner compensation, related-party transactions, deferred maintenance and cash-to-accrual differences.
Every add-back on its own line with the amount, the period, the source document, and the reason it is non-recurring or not at arm's length. Owner compensation is benchmarked to market rather than asserted. Add-backs we rejected are listed with the reason, so the credit memo can lift the analysis directly.
The QoE must assess the quality and sustainability of the business's revenue base, including customer concentration risk, contract continuity, and the likelihood that existing revenue and margins will be maintained post-sale.
Concentration by customer with the revenue at risk quantified, contract and renewal status, pricing, and the composition of growth. Whether the earnings repeat, not only what they totaled.
The Lender must use the QoE earnings in the Debt Service Coverage determination.
One adjusted earnings figure, not a range, so there is a single number to run coverage on. Sensitivities are presented separately and labeled as such. We state no Debt Service Coverage conclusion. That determination is yours.
The Lender must retain the QoE report in the credit file.
A written report, not a workbook, formatted to sit in the credit file. The supporting workbook comes with it so an analyst can trace any figure back to source.
Performed by an independent, experienced financial professional, conducted for the benefit of the Lender, and not prepared by or for the borrower or seller.
The engagement letter names the Lender as client, and the report is addressed to the Lender. Conflict check on the buyer, seller, target and intermediary before acceptance. A licensed CPA signs the report and leads the engagement.
The left column paraphrases Appendix 15. On request we will send the paragraph itself rather than a summary, so your team reads the language and not our characterisation of it.
Commercials
How the engagement works
Who we answer to is the thing that matters here, and the engagement letter is what settles it.
The Lender engages
The engagement letter names the bank as our client. That is what keeps the work independent of the buyer and the seller.
Scope fixed before work starts
Scope and fee are agreed in writing before we begin, so there are no change orders partway through a file.
Our fee is fixed at engagement, and no part of it is contingent on our findings, on the closing of the transaction, or on any decision the bank makes.
We complete third party risk review like any other vendor, and the vendor packet is ready to send the day you ask for it.
Delivery
Turnaround and capacity
Every QoE provider in the country is calling banks right now, and most banks run on a single provider who is about to receive every bank's volume at once. Capacity is the risk worth underwriting.
- Two weeks from a complete fileComplete file to your written report. We publish the document request list so complete is not a moving target, and you can send it to the borrower before the engagement letter is even signed
- The date does not move quietlyWithin two business days you get a written list of what is missing and who has to produce it. If items arrive late you get a revised date within one business day, from us, before the original date passes
- Engagements run in parallel, not in a queueWe size the team to the transaction rather than stacking it behind larger work. If we cannot serve your volume in a given month we will say so rather than accept the file.
- Reserved capacity can go in the agreementIf you want certainty for October through December, we will write a reserved number of engagements per month for your institution into the agreement rather than leave it as a verbal assurance.
Pricing
Pricing, stated plainly
$3 million to $5 million
$6,500
Written report
Above $5 million
$12,500 to $20,000+
Written report
Both tiers are the full scope. We do not put a reduced product into a lender's credit file. Scope and fee are fixed in writing before any work starts.
Multi-entity structures, multi-state operations and revenue recognized over time add scope. We identify that in the proposal rather than discovering it mid-engagement and asking for more.
Boundaries
What we are not
Getting this wrong creates a real problem in a bank's file, so we state it before anyone has to ask.
Not a Lender Service Provider
We do not pre-qualify, we do not underwrite, and we deliver no credit recommendation and no Debt Service Coverage conclusion. You get the normalized earnings figure and the findings. The credit work stays with you.
Not an Agent, on our reading
The SOP's list of parties who are not Agents names the appraiser, the environmental professional and the business valuation Qualified Source, and does not mention QoE providers. We read that as a drafting gap rather than intent. Our position is that we are not an Agent, because we represent no one before SBA. That is our reading and not SBA's stated position. If your compliance team wants a Form 159 signed, we sign it.
Not an audit
A QoE is a consulting engagement performed under the AICPA Statement on Standards for Consulting Services. It is not an audit, a review or an examination, and it carries no opinion and no assurance. Our report says exactly that in its own scope and limitations section, along with what we did and did not verify.
Not a valuation firm, and not a CPA requirement
Appendix 15 requires an accredited qualified source for the business valuation. We are not one and we do not offer it. Separately, Appendix 15 requires an independent, experienced financial professional for the QoE. It does not require a CPA. A licensed CPA signs our reports, and we offer that as a reason to choose us rather than as a rule to cite.
Questions credit officers ask
Frequently asked
Thirty minutes with the CPA who signs the reports
Bring one transaction you expect to fund this quarter. We will walk the Appendix 15 mapping against your own procedure and tell you what your file needs, whether or not you engage us.
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