Independent business valuation and transaction-focused financial due diligence for SBA 7(a) change-of-ownership transactions. BVA supports lenders, buyers, and transaction professionals with business valuation, Quality of Earnings, Cash Proof, earnings normalization, working-capital analysis, and debt-service support.
SBA 7(a) CHANGE-OF-OWNERSHIP REQUIREMENTS
Effective October 1, 2026, SBA SOP 50 10 8.1 places change-of-ownership transactions under a dedicated Appendix 15 and introduces a new independent Quality of Earnings requirement for certain larger SBA 7(a) acquisitions.
For an Initial Acquisition or Business Expansion with a Business Purchase Price of $3 million or more, the lender must obtain a Quality of Earnings report in addition to the required business valuation. The $3 million threshold excludes the appraised value of owner-occupied commercial real estate included in the transaction.
For SBA acquisition underwriting, a business valuation and a Quality of Earnings analysis serve distinct purposes. One addresses value; the other tests the reliability and sustainability of the earnings supporting the transaction and debt service.
What is the business worth?
The business valuation develops an independent indication of value for the acquired business. The analysis considers normalized financial performance, appropriate valuation approaches and market evidence, company-specific risks, assets and liabilities, and other factors relevant to the transaction.
The resulting valuation supports the lender’s assessment of whether the purchase price and transaction structure are reasonably supported by the value of the business.
What earnings can the lender reasonably rely on?
The Quality of Earnings analysis tests the reliability and sustainability of the historical earnings supporting the acquisition. The review focuses on earnings normalization, revenue quality, customer and vendor concentration, working-capital requirements, capital expenditures, unusual or nonrecurring items, and other factors that may affect ongoing cash flow.
The analysis also includes Cash Proof procedures to help reconcile reported revenue and earnings to actual cash activity and supporting financial records.
Two analyses supporting one underwriting decision
The business valuation and Quality of Earnings analysis provide different but complementary information. The valuation addresses whether the purchase price is supported by the value of the business, while the QoE tests whether the historical earnings and cash flow supporting debt repayment are reliable and sustainable.
Together, these analyses help the lender evaluate transaction structure, debt-service capacity, financial risk, and the overall credit decision.
LENDER-FOCUSED FINANCIAL DILIGENCE
A lender-directed Quality of Earnings review should do more than calculate adjusted EBITDA. BVA evaluates the underlying financial records, tests reported cash activity, identifies normalization issues and transaction risks, and develops decision-useful analysis for SBA acquisition underwriting.
What is the sustainable earnings base?
BVA reviews reported earnings to identify owner-related, discretionary, nonrecurring, unusual, and transaction-specific items that may distort historical performance. Adjustments are evaluated against supporting records and normalized to reflect the ongoing economics of the business.
The objective is to develop a supportable earnings base that the lender can use when evaluating cash flow, debt-service capacity, and the economics of the proposed acquisition.
Do reported revenues reconcile to actual cash activity?
BVA compares bank activity to the company’s reported revenue, financial statements, and available tax-return information to test whether historical sales and cash receipts are reasonably supported by underlying records.
The analysis helps identify unexplained variances, timing differences, deposits that may not represent operating revenue, and other inconsistencies that could affect the lender’s reliance on reported financial performance.
How dependable is the company’s revenue base?
BVA evaluates the composition and consistency of revenue to identify customer concentration, unusual sales patterns, nonrecurring revenue, related-party activity, and other factors that may affect the sustainability of reported performance.
The analysis helps the lender understand whether historical revenue is diversified and repeatable or dependent on a small number of customers, contracts, owners, or unusual transactions.
What cash investment is required to sustain operations?
BVA evaluates historical working-capital needs, operating liquidity, capital-expenditure requirements, and other recurring cash demands that may not be fully reflected in adjusted EBITDA.
The analysis helps the lender assess whether the business can support normal operations, required reinvestment, and debt service without relying on unrealistic assumptions about cash conversion or deferred capital spending.
Are there obligations or balance-sheet risks affecting the transaction?
BVA reviews the balance sheet and supporting records for debt, accrued liabilities, unusual payables, related-party balances, deferred obligations, customer deposits, and other items that may affect transaction value, required cash at closing, or post-closing liquidity.
The analysis helps the lender identify obligations that may not be obvious from adjusted earnings alone and assess whether additional transaction adjustments or funding considerations are warranted.
Can the transaction support the proposed debt structure?
BVA integrates the normalized earnings analysis with working-capital needs, capital expenditures, transaction adjustments, and available financing assumptions to evaluate debt-service capacity and overall transaction support.
The analysis helps the lender assess whether projected cash flow can reasonably support the proposed acquisition debt while preserving sufficient operating liquidity and financial flexibility after closing.
The engagement begins with lender direction, transaction context, and confirmation of the required valuation and Quality of Earnings scope. BVA establishes the effective dates, reporting requirements, responsible parties, and document needs before analysis begins.
BVA gathers the financial statements, tax returns, bank records, transaction documents, add-back support, customer information, debt schedules, and other records needed to perform the business valuation and lender-directed Quality of Earnings analysis.
BVA performs the business valuation while independently analyzing earnings quality, Cash Proof, normalization adjustments, revenue concentration, working capital, capital expenditures, balance-sheet risks, and debt-service capacity.
Material variances, unsupported adjustments, unusual transactions, and other diligence findings are investigated with management and the transaction parties. Significant unresolved items are identified clearly rather than assumed away.
BVA delivers the completed business valuation and Quality of Earnings analysis with supporting schedules, key findings, transaction considerations, and decision-useful information for lender underwriting and the credit decision.
SEE THE WORK
See how BVA turns valuation, Quality of Earnings, Cash Proof, working-capital analysis, and transaction findings into decision-ready information for SBA lenders, acquisition buyers, and transaction professionals.
Independent Value for Lender Underwriting
See how BVA develops an independent conclusion of value for an SBA acquisition using normalized earnings, transaction-perimeter analysis, income and market approaches, working-capital considerations, and purchase-price support.
The sample shows how valuation evidence is organized so lenders and buyers can quickly understand what the business is worth—and what the valuation does and does not conclude.
Tested Earnings & Cash Proof for Lender Underwriting
See how BVA tests reported and seller-adjusted earnings to develop a supportable lender-use EBITDA figure for an SBA acquisition.
The sample includes three-period Cash Proof, add-back verdicts, revenue and customer analysis, working capital, A/R and A/P quality, maintenance CapEx, and a lender findings log designed for efficient underwriting review.
Price, Value, Earnings & Funding in One Executive View
See how BVA brings the business valuation and Quality of Earnings findings together into a concise lender-facing transaction summary.
The sample connects purchase price, independent value, lender-use EBITDA, Cash Proof, operating funding requirements, maintenance CapEx, and key findings while keeping financeability and the final credit decision with the lender.
Prepare Before Valuation, Quality of Earnings & Lender Diligence Begin
