The SBA's newly issued standard operating procedure, SOP 50 10 8.1, is one of the most significant updates to SBA 7(a) lending in years, particularly for change of ownership transactions. Among its most discussed provisions is a required independent Quality of Earnings (QoE) analysis for acquisitions with a business purchase price of $3 million or more, taking effect October 1, 2026.

In Episode 15, host and CEO Fran San Diego moves beyond the technical language of the SOP with a panel representing every side of the transaction:

Melissa Bustarde, Partner at Branfman Mayfield Bustarde & Reichenthal LLP, a business attorney representing buyers and sellers of small businesses

Josh Siler, CPA, Senior Finance Consultant and Quality of Earnings Specialist at PBO Advisory

Ryan Smith, Principal and Founder of ThinkSBA, a leading SBA loan brokerage

Steven Hanson, Owner of Transworld Business Advisors San Diego North and an experienced business broker

Together they cover what the SBA is working to solve, what a Quality of Earnings uncovers, how sellers are responding, how LOIs and purchase agreements should address QoE outcomes, the difference between a QoE, an audit, a tax return, and a valuation, the findings that concern lenders most, why sellers are commissioning their own QoE before going to market, and a hypothetical $6 million manufacturing acquisition viewed through each panelist's lens.

The panel closes with the biggest misconceptions about the new SOP and what the lower and middle market M&A environment may look like one year from now.

Read the full transcript and key takeaways: https://pboadvisory.com/new-sba-sop-quality-of-earnings-business-acquisitions/

Read the companion blog: https://pboadvisory.com/sba-sop-50-10-8-1-quality-of-earnings-requirement/

If this episode resonated with you, subscribe to PBO Perspectives and share it with a business owner, buyer, or advisor preparing for a transaction.

Visit pboadvisory.com to learn more about PBO's Quality of Earnings, transaction readiness, and integrated finance and people advisory services, or to start a conversation with the team.

Chapters:

00:00 Welcome and the New SBA SOP 50 10 8.1

02:34 Meet the Panel

03:46 What the SBA Is Working to Solve

05:28 What a Quality of Earnings Uncovers

06:20 How Sellers Are Responding

08:18 LOIs, Negotiations, and Transaction Timelines

09:57 SBA Offers vs. Non-SBA Offers

12:17 When the QoE Requirement Comes Into Play

14:38 Purchase Agreements and Working Capital

16:18 QoE vs. an Audit, Tax Return, and Valuation

18:47 Findings That Concern Lenders

20:31 Commissioning a Sell-Side QoE Before Going to Market

23:20 Adjusted EBITDA vs. Normalized Earnings

25:39 Industries That Will See More Scrutiny

27:17 Preparing 12 to 24 Months Ahead: Books and Records

29:15 How QoE Findings Can Affect Financing

30:45 Keeping Deals on Track With a Strong LOI

32:28 Hypothetical: A $6 Million Manufacturing Acquisition

37:01 When a QoE Comes In

In most organizations, finance builds the compensation model and HR administers it. The result is a total rewards program that lives in two different places and serves neither. This episode of PBO Perspectives explores what changes when the CFO, CPO, and operations leaders build total rewards together from the start, with the CEO setting the strategic framework.In Episode 14, host and CEO Fran San Diego is joined by:Kristy Facchini, Consulting CFO at PBO AdvisoryNicole Devine, Consulting Chief People Officer at PBO AdvisoryLisbeth Fletcher, Director of Staff Operations and Administration at Feeding San DiegoTogether they cover where total rewards conversations lose their anchor, why the CEO's single most important business outcome should shape every plan, four operating principles for compensation decisions, how to talk with boards about return on talent investment, designing rewards for a multi-generational workforce, the rising cost of benefits and the value of no-cost benefits, and why communication is the difference between a benefit that exists and a benefit that matters.Lisbeth brings the view from a mission-driven nonprofit, where every dollar supports the work of ending hunger in San Diego County, and shares how peer-to-peer recognition, employee-led committees, a total rewards summary, and consistent communication keep Feeding San Diego's team engaged.Read the full transcript and key takeaways: https://pboadvisory.com/total-rewards-with-lisbeth-fletcher/

Explore the Total Rewards Hub: https://pboadvisory.com/total-rewards-resources/If this episode resonated with you, subscribe to PBO Perspectives and share it with a leader who is rethinking compensation and benefits.Visit pboadvisory.com to learn more about PBO's integrated approach to finance, people, and strategy, or to start a conversation with the team. Learn more about Feeding San Diego at feedingsandiego.org.Chapters:00:00 Cold Open: A Total Rewards Strategy No One Owns01:17 Meet the Panel and Feeding San Diego03:31 Where Total Rewards Conversations Lose Their Anchor05:47 Aligning Bonuses to Margin, Not Just Revenue07:28 Rewarding Behavior That Builds Enterprise Value09:33 How Feeding San Diego Defines Success12:13 Peer-to-Peer Recognition and Culture13:10 Starting With the CEO's Single Business Outcome14:08 Messaging and Total Rewards Storytelling16:45 Clarity Before the Comp Plan18:40 Four Operating Principles for Compensation Decisions20:29 Transparency, Equity, and Market Data22:15 Talking With Boards About Return on Talent Investment24:44 Designing Rewards for a Multi-Generational Workforce28:37 Flexibility and In-Person Collaboration30:47 Connecting Employees to the Mission33:29 Benefits, Well-Being, and Rising Healthcare Costs35:46 Modeling Benefit Costs and No-Cost Benefits37:43 Culture as a Reason People Stay38:38 Employee-Led Committees at Feeding San Diego40:33 Culture and the Total Rewards Viewpoint42:27 Communicating a Total Rewards Program45:47 Making Incentive Compensation Visible48:22 How Feeding San Diego Communicates Value53:37 Final Takeaways56:01 Closing