Short answer: Under SBA SOP 50 10 8.1, a lender quality of earnings must include a Cash Proof that reconciles bank statements to the income statement and tax return for both the trailing twelve months and the last two fiscal years. It must also be conducted for the lender’s benefit, and a report the buyer commissioned can be used only after one of the lender’s own vendors reviews it. Both points make it structurally different from a typical M&A quality of earnings.
Updated October 1, 2026. SBA’s September 25 technical update narrowed the quality of earnings independence clause. Read what changed and what it means for a lender’s file.
Both start from the same rule: SBA quality of earnings.
The Trailing-Twelve-Months Assumption Does Not Hold Here
In a typical M&A engagement, the buyer wants to know what the business earns right now. The proof of cash reconciles bank deposits and disbursements to revenue and expenses for the trailing twelve months, and that is the core deliverable. The buyer cares about current run rate.
The SBA requirement reaches further back. The SOP defines the Cash Proof as reconstructing cash receipts and disbursements “by reconciling bank statement data to the income statement and tax return for each period under review,” and says it “must be performed on both a trailing 12-month basis and the last two fiscal years.” The QoE must also reconcile the accountant-prepared statements, tax returns, internal statements and IRS transcript data to a normalized earnings figure, and the lender must use that figure in its debt service coverage calculation.
What the Procedures Actually Change
Running proof of cash for SBA lenders means extending the data request and the reconciliation work. In practice that means:
- Bank statements for the trailing twelve months and the last two full fiscal years
- A data request workbook that sets the request periods from the fiscal year end and the bank statement cycles
- Reconciliation to the tax returns and IRS transcript data, not just the internal income statement
- Documentation of every add-back, including owner compensation, related-party transactions and cash-to-accrual differences
- Output formatted for bank credit review rather than for an M&A buyer
We updated our 11-step front-end procedures and data request workbooks to handle this extension under SOP 50 10 8.1. Our SOP 50 10 8.1 guide covers the full requirement, including the $3 million purchase price threshold that triggers it.
Why This Matters for Firms Doing Both
Firms that do both M&A quality of earnings and SBA lender work need to be deliberate about which procedures apply. A trailing-twelve-months report formatted for a buyer does not meet the SBA requirement. There is also an independence step. The SOP says the QoE “must not be prepared by or for the seller,” which leaves a buyer-commissioned report eligible, but it cannot simply be re-addressed to the bank. The Lender “may not rely upon a QoE report prepared by another party without a review being performed by one of their vendors,” and those review findings must go in the loan file with the original report. See who can prepare an SBA quality of earnings.
QoEAgent’s AI-assisted QoE approach handles both contexts, and the same bank-first method explains what compilations miss. If you are scoping SBA lender QoE work and want to understand what the engagement involves, we are glad to walk through it.