Rules and sources
Why trust these numbers? Because you can check them. Every rule the tools use is listed here with where it comes from and the date it was last checked against that source.
26 rules. Rules version 2026-11-11.
SBA rules
Requirements set by the SBA. Each one names the regulation or SBA document it comes from.
Business valuation
The lender must get a valuation of the business for every change of ownership, and the total acquisition debt cannot exceed the value it supports. Above a $350,000 business purchase price the valuation must come from an independent Qualified Source. At $350,000 or less the lender may value the business itself, unless the buyer and seller are closely related.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-11.
business-valuation-required
Citizenship of owners
100% of direct and indirect owners must be U.S. citizens or U.S. nationals whose principal residence is in the U.S. Lawful permanent residents (green-card holders) may not hold any ownership interest.
Rule: SBA Policy Notice 5000-876441 (effective 2026-03-01). Checked 2026-11-09.
owner-citizenship
Earnouts
SBA 7(a) loans generally do not allow earnouts: purchase price that is paid later and depends on how the business performs. A working-capital true-up (a one-time adjustment after closing to settle the agreed working capital) is not an earnout.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-10.
earnout-prohibited
Environmental investigation
Examples only; the official list is Appendix 6 and the lender checks it. A current or known prior use on that list means the environmental investigation starts with a Phase I Environmental Site Assessment, whatever the loan amount. It does not by itself make the loan ineligible. Car-wash-only facilities are an exception: a lighter Transaction Screen is an acceptable starting point, so car washes are left out of the examples.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 6: NAICS Codes of Environmentally Sensitive Industries. Checked 2026-11-10.
environmental-investigation
Lender-ordered Quality of Earnings report
$3,000,000
Lenders order a Quality of Earnings report on acquisitions of $3M and up, not counting real estate.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-11.
qofe-lender-threshold
Lender's debt coverage floor
1.25x
Applies to acquisitions and must be shown on historical or adjusted earnings, not projections.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-11.
dscr-floor
Maximum SBA 7(a) loan
$5,000,000
Rule: 13 CFR 120.151 (statutory limit for total loans to a borrower). Checked 2026-11-10.
max-7a-loan
Minimum down payment (equity injection)
10%
SBA requires the buyer to put in at least 10% of total project cost on an acquisition, and the requirement cannot be reduced. The Screener also uses 10% of price as the down payment when the buyer has not entered one.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-11.
min-equity-injection-pct
Owner occupancy of real estate
Share of the building's rentable space the borrower's business must occupy when the loan pays for real estate.
Rule: 13 CFR 120.131 (leasing part of new construction or existing building to another business). Checked 2026-11-10.
owner-occupancy
SBA Franchise Directory
A franchise, license, or dealer brand must be listed on the SBA Franchise Directory for the loan to be eligible.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Section A, Chapter 1, Paragraph G; SBA Franchise Directory. Checked 2026-11-10.
franchise-directory
SBA size standard
The business, counted together with its affiliates, must be small under SBA's size standard for its industry (NAICS) code, or under SBA's alternative size standard for 7(a) loans. Guided self-check only. The tool does not look up the NAICS table. Verify with your lender.
Rule: 13 CFR Part 121 (SBA size regulations); Table of Size Standards at 13 CFR 121.201. Checked 2026-11-10.
size-standard
Seller consulting after the sale
After a complete change of ownership the seller may stay on as a paid consultant for at most 24 months in total, and may not remain an officer, director, stockholder, or employee.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-10.
seller-consulting-limit
Seller note counted as down payment
A seller note counts toward the buyer's equity injection only if it is on full standby (no principal and no interest payments) for the entire life of the SBA loan, and it can supply at most half of the required injection. Confirm the exact terms with your lender.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), change of ownership requirements: seller debt as equity injection. Checked 2026-11-10.
seller-note-standby
Seller staying on as an owner (partial change of ownership)
When the seller keeps part of the business, SBA treats the deal as a partial change of ownership, a separate category with its own requirements. Every new owner is a co-borrower. A seller who keeps less than 20% must guarantee the loan for at least two years. The equity injection is measured on the purchase price.
Rule: SBA SOP 50 10 8.1 (effective 2026-10-01), Appendix 15 (change of ownership requirements). Checked 2026-11-11.
partial-change-of-ownership
Rule of thumbs
Screening shortcuts and checklists. They are not SBA requirements and not a valuation. Use them to decide where to look harder.
Data room request list
Rule: Common acquisition diligence practice, compiled for this tool. Checked 2026-11-10.
data-room-requests
Diligence checklist items
Rule: Common acquisition diligence practice, compiled for this tool. Checked 2026-11-10.
base-diligence-items
Industry-specific diligence items
Rule: Common acquisition diligence practice, compiled for this tool. Checked 2026-11-10.
industry-diligence
Key employees table
Rule: Common acquisition diligence practice, compiled for this tool. Checked 2026-11-10.
key-employees
Software and systems inventory
Rule: Common acquisition diligence practice, compiled for this tool. Checked 2026-11-10.
software-inventory
Typical price multiples by deal size
$500,000 to $1,000,000: 3.0x SDE; $1,000,000 to $2,000,000: 3.1x SDE; $2,000,000 to $5,000,000: 4.8x EBITDA
Typical quoted multiples by deal size. A screening heuristic, not a valuation. A price of exactly $1M is treated as the $1M to $2M band, and exactly $2M as the EBITDA band. The $500K to $1M band is derived from closed-deal data rather than observed; the derivation is on the rules page. Businesses that actually sold closed at lower multiples: a median of 3.1x SDE ($1M to $2M) and 4.0x EBITDA ($2M to $5M) in Q2 2026 (IBBA and M&A Source Market Pulse). Asking prices typically run above closing prices; this test judges a listing against other listings.
The $500K to $1M band (3.0x SDE) is derived, not observed: the IBBA and M&A Source Market Pulse Q2 2026 closed median for that size was 2.8x SDE, and BizBuySell's 2025 data puts the average sale price at 94% of asking, so the asking-equivalent is 2.8 / 0.94, about 3.0x.
Rule: Asking multiples observed across current business-for-sale listings, October 2026; the $500K to $1M band is derived (see note). Checked 2026-11-11.
multiple-bands
Starting assumptions
Numbers the forms start with. Change any of them to match your deal.
Default buyer profile
Rule: Generic placeholder defaults chosen for the public tool. Checked 2026-11-09.
default-buyer-profile
Default financing fees
$120,000
Estimate of SBA guarantee fee, lender packaging, and closing costs. Always shown as its own input.
Rule: Default assumption in this tool; change it to match your deal. Checked 2026-11-09.
default-fee-stack
Default interest rate
10%
Rule: Default assumption in this tool; change it to match your deal. Checked 2026-11-09.
default-annual-rate
Default loan term
10 years
Rule: Default assumption in this tool; change it to match your deal. Checked 2026-11-09.
default-term-years
Default share of fees financed
100%
Rule: Default assumption in this tool; change it to match your deal. Checked 2026-11-09.
default-fees-financed-pct