Buyers keep asking us the same question since SBA released SOP 50 10 8.1: “If the lender is ordering a Quality of Earnings report, do I still need a business plan?”
Short answer: yes. They answer different questions. A Quality of Earnings (QoE) report tells the lender what the business really earned. A business plan tells the lender what you will do with it.
Under the new rules, larger deals need both. Smaller deals need the plan and may benefit from a lighter QoE. Here is how to decide.
What Changed on 1 October 2026
SOP 50 10 8.1 applies to SBA loans numbered on or after 1 October 2026. For Initial Acquisitions and Business Expansions with a purchase price of $3 million or more (excluding owner occupied real estate), the lender must obtain an independent QoE.
Three details catch buyers off guard:
- The lender orders it. A QoE the buyer commissioned on their own does not satisfy the requirement.
- The lender must use it. Normalized earnings from the QoE feed directly into the debt service coverage test. If the QoE figure is lower, the loan can shrink.
- The buyer usually pays. The cost is typically passed to the borrower and may count toward the equity injection.
Owner Buyouts and ESOP transactions are exempt regardless of size.
What a QoE Does (and What It Does Not)
A QoE is a financial due diligence report, usually prepared by an accounting firm. Under SOP 8.1 it must reconcile the seller’s books to bank statements and tax returns for the trailing twelve months and the two prior fiscal years. It also looks at customer concentration and whether margins are sustainable.
| A QoE Answers | A QoE Does Not Answer |
| Were reported revenues actually deposited? | Can this buyer run the business? |
| Which add backs are legitimate? | What will change after closing? |
| Is working capital normal for the industry? | How will the buyer keep key customers? |
| Are margins stable or declining? | What is the growth plan? |
| How concentrated is revenue? | How will the seller transition be managed? |
The right column is the business plan’s job. No accounting firm writes that section for you.
What a Business Plan Does That a QoE Cannot
The plan is forward looking and buyer specific. It covers:
- Buyer qualifications and how gaps in experience are covered.
- Transition plan for the seller’s consulting period, now up to 24 months.
- Operating changes such as pricing, staffing, new services or cost cuts.
- Sources and Uses showing equity sources tagged as Limited or Unlimited under the new 50 percent cap.
- Projections as a stress test, starting from QoE normalized earnings.
- Risk mitigation for concentration, lease terms and key employees.
An underwriter reading a QoE sees a clean historical picture. Without a plan, they still do not know whether the buyer can hold it together.
Do You Need a QoE, a Business Plan or Both?
This is the decision matrix we use with clients. It combines deal size, transaction type and risk factors.
| Deal Profile | QoE | Business Plan | Why |
| Initial Acquisition, $3M+ purchase price | Required (lender ordered) | Required | SOP 8.1 mandate plus standard underwriting |
| Business Expansion, $3M+ | Required (lender ordered) | Required | Same mandate; plan must show integration |
| Owner Buyout, any size | Not required | Required | Exempt from QoE; plan shows continuity |
| Initial Acquisition, $1M to $3M | Optional, often smart | Required | No mandate, but messy books invite scrutiny |
| Initial Acquisition, under $1M | Rarely needed | Required | Plan plus tax returns usually sufficient |
| Any deal with cash heavy revenue | Strongly advised | Required | Cash reconciliation is the main risk |
| Any deal with one customer above 25% | Strongly advised | Required | Concentration analysis protects the buyer |
A buyer commissioned QoE on a sub $3 million deal is not wasted money. It protects you before you sign. It just does not replace the lender’s own review on larger deals.
How the Two Documents Work Together
Here is the part most guides skip. On a $3 million plus deal, the sequence matters.
Step 1: Draft the plan using seller figures. You need a plan early to get a term sheet and a loan number.
Step 2: The lender orders the QoE. This often happens after the LOI and before final approval.
Step 3: Reconcile the plan to the QoE. Update your historical section, add backs and DSCR schedule to match QoE normalized earnings.
Step 4: Rebase your projections. Your base case must start from QoE earnings, not the broker’s figures.
Step 5: Resubmit. The final plan and the QoE should tell one consistent story.
Buyers who skip Step 3 hand the underwriter two documents with different numbers. That delays approval every time.
A Worked Example: When the QoE Comes In Lower
A buyer agrees to pay $3.6 million for a regional logistics company. The broker’s package shows adjusted EBITDA of $900,000.
The QoE finds:
- $60,000 of add backs that recur (a “one time” consulting fee paid three years running).
- $35,000 of revenue booked but never deposited.
- Normalized EBITDA: $805,000.
The lender runs DSCR on $805,000, less the buyer’s salary. Coverage drops from 1.38x to 1.22x, below the 1.25x floor.
The fixes on the table:
- Renegotiate the price down.
- Increase the equity injection.
- Extend the seller note standby period.
The business plan is where the buyer presents the revised structure. A plan that already includes a downside case at lower earnings shortens this conversation from weeks to days. For the full coverage math, see our guide on debt service coverage ratio for SBA loan applicants.
What a QoE Costs and How to Budget
QoE fees vary with deal size, the state of the seller’s books and the number of locations. For SBA sized deals, buyers commonly see fees in the low five figures, and messier books push fees higher.
Budget for it early. Because the fee may count toward your equity injection under SOP 8.1, confirm with your lender how it will be treated before you finalize your Sources and Uses table.
Total Cost of Diligence: A Simple Framework
Think of the QoE and plan as insurance on the largest purchase most buyers ever make.
| Cost Item | Protects Against |
| QoE report | Overpaying for earnings that are not real |
| Business plan | Loan decline, delays, weak transition |
| Independent valuation | Debt exceeding value under SOP 8.1 |
| Legal review of the purchase agreement | Hidden liabilities and weak seller covenants |
On a $3 million deal, a mispriced earnings figure of $100,000 at a 4x multiple is a $400,000 overpayment. Diligence costs are small by comparison.
Common Mistakes Buyers Make
Assuming the QoE replaces the plan. It does not. Underwriters still need a buyer specific plan.
Using a QoE from the seller. Sell side QoE reports are written to support a price. Under SOP 8.1, the lender must order its own.
Not updating the plan after the QoE. Two sets of numbers in one file slow everything down. Our guide on the most common mistakes in SBA loan business plans lists others.
Writing a 60 page plan. Length does not impress underwriters. Clarity does. Our guide on how long a business plan for a bank loan should be gives realistic page counts.
Special Cases
Expansion buyers. A company buying a second business must show integration: shared overhead, cross selling and management capacity. Our guide on SBA loan business plans for expansion covers that narrative.
Manufacturing acquisitions. Inventory valuation and equipment condition drive QoE findings in manufacturing. The plan should address capacity, maintenance capex and customer contracts. See our guide on SBA loan business plans for manufacturing companies.
Frequently Asked Questions
Is a Quality of Earnings report required for SBA loans?
Under SOP 50 10 8.1, yes for Initial Acquisitions and Business Expansions with a purchase price of $3 million or more. The lender must order it.
Can I use my own QoE report?
Not to satisfy the SOP 8.1 requirement on $3 million plus deals. A buyer commissioned QoE can still help you negotiate before the lender’s review.
Does a QoE replace the business plan?
No. The QoE verifies past earnings. The business plan explains how the buyer will run the business and repay the loan.
Who pays for the QoE?
The buyer usually pays. The cost may count toward the equity injection; confirm treatment with your lender.
What happens if the QoE shows lower earnings?
The lender uses the lower figure for DSCR. If coverage drops below the minimum, you may need a lower price, more equity or a revised seller note.
Get Your Plan and QoE Telling One Story
Deals over $3 million now live or die on how well the business plan and the QoE agree. We see the gap most often in add backs and in projections that start from the wrong baseline.
BPlanWriter writes SBA acquisition plans designed to be reconciled with a lender’s QoE. We build the historical section, DSCR schedule and downside case so updates take days, not weeks. See our SBA / Bank Loan Business Plan service for scope and samples.
Choosing a writer for a deal this size deserves care. Use our 14 questions to ask before you pay a business plan writer, then book a free consultation with our team.
This article is general information and not accounting, legal or lending advice.
