What SOP 50 10 8.1 Means for Healthcare Acquisitions
The SBA's New Quality of Earnings Mandate
Effective October 1, 2026, a Quality of Earnings report is no longer a best practice on larger SBA-financed acquisitions. It is a requirement. Here is what the new SOP demands, why it matters most in healthcare, and how Acuvance Coker helps lenders and buyers get it right the first time.
Effective October 1, 2026, SBA lenders financing certain change-of-ownership transactions must obtain an independent Quality of Earnings (QoE) report when the Business Purchase Price reaches $3 million or more. The requirement, introduced under SBA SOP 50 10 8.1, represents one of the most significant underwriting changes for acquisition financing in recent years.
For healthcare acquisitions, the impact may be even greater. Provider compensation structures, payer reimbursement arrangements, referral patterns, and revenue cycle performance can all meaningfully affect normalized earnings and debt service capacity. As a result, the Quality of Earnings process is becoming a central component of both transaction underwriting and risk assessment.
The threshold is measured on the purchase price itself, before the application of buyer equity, seller debt, or any other financing source. It cannot be engineered away through a deal structure. And in healthcare, where practice acquisitions routinely exceed $3 million, the new mandate applies to a substantial portion of the market.
What SOP 50 10 8.1 Requires
The new SOP does not simply say "get a QoE." It prescribes who must perform the analysis, for whose benefit, and what the report must contain. Lenders should understand each element, because a report that falls short on any of them does not satisfy the requirement.
- Independence and lender orientation. The QoE must be performed by an independent, experienced financial professional and must be conducted for the benefit of the lender. Because the QoE is part of the transaction's financial due diligence, the report may not be prepared by or for the borrower or the seller. A sell-side report handed across the table does not check the box.
- Full reconciliation to normalized earnings. The analysis must reconcile the target's 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.
- A mandatory Cash Proof. Every QoE must include a Cash Proof: an independent reconstruction of cash receipts and disbursements that reconciles bank statement data to the income statement and tax return for each period under review. The Cash Proof must be performed on both a trailing twelve-month basis and the last two fiscal years, and it is designed to surface income discrepancies and undisclosed expenses.
- Documented add-backs and adjustments. The report must identify and document all add-backs and adjustments to the seller's reported earnings, including non-recurring revenue or expenses, above- or below-market owner compensation, related-party transactions, deferred maintenance, and differences between cash-basis and accrual-basis accounting.
- Revenue quality and sustainability. The QoE must assess the quality and durability of the revenue base, including customer concentration risk, contract continuity, and the likelihood that existing revenue and margins will be maintained post-sale.
- Direct use in underwriting. The lender must use the earnings from the QoE in the Debt Service Coverage determination and retain the report in the credit file. If the resulting coverage does not support the business valuation and proposed debt structure, the loan amount must be reduced, with additional equity available to bridge the gap.
The QoE is no longer a supporting exhibit. Under the new SOP, its adjusted earnings figure drives the Debt Service Coverage calculation, which in turn governs how much debt the transaction can carry.
The practical implications are significant. Adjustments identified during the Quality of Earnings process, including unsupported add-backs, provider compensation normalization, payer concentration, referral source dependence, reimbursement risk, or non-recurring revenue, can materially affect normalized earnings. As a result, a transaction that appears financeable based on preliminary financial information may ultimately require a revised capital structure, additional buyer equity, or a lower loan amount once the Quality of Earnings analysis is complete.
Timing matters as well. For lenders processing under PLP authority, the business valuation and the QoE may be completed after the SBA Loan Number is issued and before closing, but both must be formally engaged, with a vendor retained and an engagement letter in place, at the time the loan number is issued. Waiting until late in the process to identify a qualified QoE provider is no longer an option.
Why the Stakes Are Highest in Healthcare
Every industry has earnings quality issues, but healthcare has its own category of them. The gap between what a practice reports and what a buyer will actually earn is often wider and harder to see than in any other segment of the lower-middle market.
- Revenue is an estimate until cash arrives. Gross charges, contractual adjustments, payor-specific reimbursement, denials, and recoupments mean that healthcare revenue recognized on internal statements can differ materially from collectible reality. A credible QoE must rebuild net revenue from collections behavior, not accept the P&L at face value. The SOP's mandatory Cash Proof effectively requires exactly this discipline.
- Cash-basis books, accrual-basis economics. Most physician, dental, and behavioral health practices keep cash-basis books. The SOP explicitly requires the QoE to address cash-versus-accrual methodology differences, which in healthcare means measuring accounts receivable dynamics, payor lag, and revenue timing with real rigor.
- Owner and provider compensation distorts everything. Selling clinicians frequently pay themselves above- or below-market, blend compensation with distributions, or run personal expenses through the practice. Normalizing provider compensation to post-close reality, including replacement cost for departing owners who also produce revenue, is often the single largest adjustment in a healthcare QoE.
- Related-party arrangements are everywhere. Real estate held in affiliated entities, management fees between related companies, family members on payroll, and intercompany service arrangements all require identification and arm's-length restatement, precisely as the SOP demands.
- Revenue durability is a clinical question, not just a financial one. Payor contract continuity, referral source concentration, reliance on a small number of producing providers, credentialing transferability, and regulatory exposure all bear directly on whether historical margins survive a change of ownership. Assessing them requires healthcare-specific knowledge that a generalist diligence provider simply does not carry.
Put plainly: the SOP now requires every large SBA-financed acquisition to receive the kind of scrutiny that healthcare deals have always needed. Buyers and lenders who pair the mandate with a healthcare-fluent diligence team turn a compliance requirement into genuine risk protection.
How Acuvance Coker Serves Lenders and Buyers Under the New Standard
Acuvance Coker's financial due diligence practice was built for exactly this assignment: independent, lender-oriented Quality of Earnings work performed exclusively on healthcare businesses. Healthcare is all we do, across dental and DSO platforms, behavioral health and autism services, physician and specialty groups, home health, and other provider verticals.
Purpose-built for the SOP's requirements
Our QoE reports are structured to satisfy each element of SOP 50 10 8.1 by design. We contract and conduct every engagement for the lender's benefit, preserving the independence the SOP requires. Our analysis reconciles accountant-prepared financials, tax returns, internal statements, and IRS transcript data to a single normalized earnings figure. And our Cash Proof procedures independently reconstruct receipts and disbursements from bank statement data across the trailing twelve months and the last two fiscal years, tying cash to the income statement and the tax returns for every period under review.
Healthcare depth where it changes the answer
Because our diligence professionals work solely in healthcare, we are able to identify and evaluate adjustments that may materially affect normalized earnings. We normalize provider compensation against current market benchmarks. We rebuild net revenue from collections and payor behavior rather than accepting booked figures. We evaluate payor contract continuity, referral concentration, and provider dependency as part of the revenue sustainability assessment the SOP requires. When a finding raises questions beyond the numbers, the broader Acuvance Coker platform stands behind the diligence team, with specialists in revenue cycle and payor contracting, compensation valuation, compliance, and transaction strategy available to run issues to ground.
One platform for the full diligence file
The SOP requires both a business valuation and a QoE on covered transactions, performed for the lender. Acuvance Coker's platform brings valuation and financial due diligence expertise together in one firm, giving lenders a coordinated diligence file, consistent underlying data, and a single point of accountability rather than two vendors working from different assumptions.
Built for lender timelines
We understand PLP mechanics and SBA processing realities. Our engagement process is designed so that lenders can have a signed engagement letter in place when the SBA Loan Number is issued, with clear delivery schedules that keep the credit memorandum update, the Debt Service Coverage recalculation, and closing on track.
Most engagements are completed within approximately 20 business days following receipt of a complete diligence package, with preliminary observations communicated earlier in the process to support underwriting discussions and identify potential issues before closing.
We communicate findings in plain language and present adjusted earnings in a format lenders can carry directly into their DSC analysis and credit file.
A QoE built this way satisfies the SOP on its face, protects the lender's credit decision in substance, and gives the buyer a clear-eyed view of the business they are about to own.
What Lenders and Buyers Should Do Now
- Map your pipeline against the threshold. Identify every change-of-ownership deal with a Business Purchase Price at or above $3 million, remembering that owner-occupied real estate is carved out of the purchase price for this test and that the threshold applies before equity or seller debt.
- Line up qualified providers before you need them. Under PLP authority, the QoE must be formally engaged upon issuance of the SBA Loan Number. Building a relationship with a qualified healthcare QoE provider now prevents scrambling later.
- Insist on healthcare-specific scope. Ask any prospective provider how they perform the Cash Proof, how they normalize provider compensation, and how they assess payor and referral concentration. Generic diligence scopes miss the risks that actually impair healthcare earnings.
- Use the QoE as more than a checkbox. The SOP requires the QoE's earnings to drive Debt Service Coverage. Lenders who engage early can use preliminary findings to right-size structure, price risk accurately, and avoid late-stage surprises that delay or kill closings.
Talk to Acuvance Coker
Acuvance Coker brings more than three decades of healthcare advisory experience and a dedicated, healthcare-only financial due diligence practice to every engagement. Whether you are an SBA lender preparing for the new SOP, a searcher or independent sponsor pursuing your first platform, or a buyer who wants certainty about the earnings behind the purchase price, our team delivers Quality of Earnings reports that meet the letter of SOP 50 10 8.1 and the substance of sound credit judgment.
To discuss an upcoming transaction or establish a lender relationship ahead of the October 1, 2026 effective date, contact the Acuvance Coker Transaction Advisory team at cokergroup.com/contact.
