For SBA lenders
Short answer
Lenders must obtain and analyze comprehensive seller financial documentation, including tax returns (3 years), interim financial statements, and a detailed breakdown of discretionary expenses.
For a change of ownership, lenders must verify the historical financial performance of the acquired business. This includes obtaining federal income tax returns for the past three years, current interim financial statements, and often a seller's discretionary earnings (SDE) or adjusted EBITDA calculation to normalize for owner-specific expenses and non-recurring items.
For a business acquisition, the lender requires the seller's federal tax returns (Form 1120 or Schedule C) for 2021, 2022, and 2023, plus year-to-date income statements and balance sheets for 2024. They also request a detailed list of owner salaries, benefits, and one-time expenses for adjustment.
Insider move
The accuracy of seller financials is paramount for underwriting the loan and assessing the business's repayment ability. Lenders must reconcile discrepancies, confirm consistency, and understand all adjustments made to arrive at a normalized cash flow.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on change-of-ownership underwriting
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day