Short answer
- Bring at least 10% of the project cost as equity. A full-standby seller note plus small investors can cover up to half of it.
- The business must show 1.25x debt coverage on historical earnings for loans numbered on or after October 1, 2026.
- Every deal now needs an independent credentialed valuation, and purchases of $3M+ need a lender-ordered Quality of Earnings.
- All owners must be U.S. citizens or nationals. In Florida, protect yourself from the seller's unpaid state taxes.
What changed on October 1, 2026
The SBA rewrote its change-of-ownership rules in SOP 50 10 8.1. They apply to loans that receive an SBA loan number on or after October 1, 2026. If you're buying a Florida business with a 7(a) loan now, these are the rules your lender is underwriting to.
| Item | Before Oct 1, 2026 | Now (SOP 50 10 8.1) |
|---|---|---|
| Debt coverage, first acquisition | 1.15x | 1.25x on historical earnings. Projections don't count. |
| Debt coverage, owner buying a same-industry company | 1.15x | 1.15x (new "business expansion" category) |
| Business valuation | Lender's internal estimate allowed on smaller deals | Independent credentialed valuation on every change of ownership. Total debt is capped at that value. |
| Quality of Earnings report | Not required | Lender-ordered QoE for purchases of $3M or more |
| Seller note and minority investors as equity | Seller note on full standby up to half of the injection | Standby seller notes plus investors under 20% ownership, combined, capped at half of the injection |
| Seller transition | Up to 12 months as a consultant | Up to 24 months as a consultant |
| Streamlined underwriting for small loans | Available at $350K and under | Not available for any change of ownership |
Two rules that didn't change: earnouts are still not allowed in an SBA-financed acquisition, and the maximum 7(a) loan is still $5 million.
How much you need to put down
Plan on at least 10% of the total project cost as equity for a first acquisition. "Project cost" is more than the price: it includes working capital, closing costs and the SBA guaranty fee if it's financed.
Where that 10% can come from:
- No limit: your own cash, a personal loan you repay from income outside the business (for example, a HELOC backed by your salary), and grants with no repayment.
- Capped at half of the injection, combined: a seller note on full standby (no principal or interest payments for the life of the SBA loan, usually 10 years) and equity from investors who own less than 20%.
Example: on a $2,000,000 project, you need $200,000 of equity. At most $100,000 of it can be a standby seller note. The other $100,000 has to be yours.
Watch for this
A seller note that gets paid on any schedule during the SBA loan is not equity. It's more debt, and it counts against your coverage ratio. Sellers often agree to "standby" in the LOI and then ask for interest-only payments in the purchase agreement. Catch it early.
Debt coverage: the 1.25x test
Debt service coverage ratio (DSCR) is the business's cash flow available to pay debt, divided by the annual debt payments. Under the new rules, a first acquisition needs at least 1.25x, measured on the last fiscal year or the average of the last two. Lenders can't use your growth plan to get there.
Here's a worked example using the default figures in my SBA Deal Check:
| Purchase price | $1,800,000 |
|---|---|
| Your cash (5%) + standby seller note (5%) | $90,000 + $90,000 |
| SBA loan | $1,530,000 at 10.0% (prime of 7.00% plus 3%), 10 years |
| Annual SBA payments | about $242,600 |
| Cash flow needed at 1.25x | about $303,300 |
"Cash flow" here means after paying someone to run the business. If you'll be the full-time operator, the lender will still deduct a reasonable salary for you. If you won't, it deducts a manager's salary. This is where listings built on seller's discretionary earnings (SDE) fall apart, and it's why I wrote a separate guide on how buyers and lenders actually price a business.
The independent valuation and Quality of Earnings
Every SBA-financed change of ownership now needs an independent valuation from a credentialed appraiser (ASA, CBA, ABV, CVA or BCA). Total transaction debt, including any seller note that isn't on full standby, can't exceed that value. If you agree to pay more than the appraised value, the difference has to come from additional cash or a full-standby seller note, not the loan.
For purchases of $3 million or more, the lender also orders a Quality of Earnings report. It reconciles bank deposits to the income statement and tax returns for the trailing twelve months and the last two fiscal years, and it tests every add-back. The lender must use the QoE's normalized earnings in the coverage test. Budget three to four weeks for it.
What this means for your offer: price the business on earnings that will survive a QoE, not on the listing's add-backs. If the seller won't move, a full-standby seller note is the cleanest way to bridge a valuation gap.
Closing costs to budget
- SBA upfront guaranty fee (FY2027, loans numbered on or after Oct 1, 2026): on loans over $700,000 with terms over 12 months, 3.5% of the guaranteed portion up to $1 million plus 3.75% above that. The schedule is unchanged from FY2026. On the $1.53M example, the SBA guarantees 75% ($1,147,500), so the fee is about $40,500. It can be financed.
- Annual service fee: 0.55% of the guaranteed balance, paid by the lender. It can't be passed to you.
- Florida documentary stamp tax: $0.35 per $100 on promissory notes, so about $5,355 on a $1.53M note. Unsecured notes, like many seller notes, are capped at $2,450.
- Third parties: the valuation, QoE if required, your attorney, your CPA, and lender closing costs. Under the new rules, valuation and QoE costs can count toward your equity injection.
Florida-specific diligence
- The seller's unpaid state taxes can become yours. Under Florida Statute 213.758, a buyer of more than 50% of a business or its assets can be liable for the seller's unpaid Department of Revenue taxes, including sales and reemployment tax, up to the greater of the purchase price or the value acquired. Protect yourself with a holdback, a tax compliance certificate from DOR, or both.
- Licenses don't transfer automatically. In contracting, the license follows a qualifying individual. If the seller is the qualifier, you need a plan before closing. I cover this in the construction and home services guide.
- Non-competes are enforceable when reasonable. Florida Statute 542.335 presumes a non-compete tied to the sale of a business is reasonable at three years or less, and unreasonable over seven.
- Leases and key contracts need landlord and counterparty consent to assign. Start those conversations before you're under deadline.
Who qualifies
- Since March 1, 2026, every direct and indirect owner and guarantor must be a U.S. citizen or national with a principal residence in the U.S. Lawful permanent residents no longer qualify.
- Owners of 20% or more personally guarantee the loan.
- If business assets don't fully secure the loan, the lender will take a lien on personal real estate of 20%+ owners where there's meaningful equity.
- Expect the lender to want relevant management or industry experience, or a credible plan to cover it.
What I learned buying my own company
I bought Southern Pool Designs, a Florida luxury pool builder, with an SBA 7(a) loan in 2025, and I run it today.
A practical sequence
- Confirm your equity: cash on hand, outside-income loans, and whether the seller will do a full-standby note.
- Get prequalified with an SBA preferred lender before you sign an LOI.
- Recast the seller's earnings yourself, including a manager's salary, and run the 1.25x test. My SBA Deal Check does this in a minute.
- Write the LOI with standby terms, working capital, consulting period and non-compete spelled out.
- Order diligence: valuation, QoE if $3M+, Florida tax compliance, licenses, leases.
- Close, then run a 100-day plan for cash, people, pricing and systems.
FAQ
What is the minimum down payment to buy a business with an SBA loan?
At least 10% of the total project cost for a first acquisition. Up to half of that can come from a seller note on full standby combined with investors who own less than 20%.
What DSCR does the SBA require for a business acquisition in 2026?
For loans numbered on or after October 1, 2026, 1.25x on historical earnings for initial acquisitions and owner buyouts, and 1.15x for business expansions in the same industry group.
Does an SBA business acquisition require a business valuation?
Yes. Under SOP 50 10 8.1, every change of ownership needs an independent valuation from a credentialed appraiser, and total debt can't exceed that value.
Can a seller note count toward the SBA equity injection?
Yes, if it is on full standby with no principal or interest payments for the life of the SBA loan, and only up to half of the required injection when combined with minority investor equity.
Can I use an earnout in an SBA-financed acquisition?
No. Earnouts are not permitted in SBA 7(a) change-of-ownership loans.
Am I liable for the seller's Florida taxes when I buy a business?
You can be. Under Florida Statute 213.758, a buyer of more than 50% of a business or its assets can be liable for the seller's unpaid Department of Revenue taxes unless protections like a holdback or tax compliance certificate are in place.
Sources
- SBA SOP 50 10 8.1 summary (Accredited)
- New SBA business acquisition rules (PBMares)
- FY2027 SBA loan fees (NAGGL)
- SBA citizenship rule (NerdWallet)
- Florida documentary stamp tax (Florida DOR)
- Successor liability for Florida taxes, s. 213.758 (Brewers Law)
- Prime rate history (FedPrimeRate)
This guide is general information, not legal, tax or lending advice. SBA rules and Florida law change; confirm current terms with your lender, attorney and CPA.