This Week in ETA: We've been covering the SBA's new SOP changes closely over the last few weeks, and I wanted to share a meaningful positive update before we all moved on. The new rules were set to take effect October 1st, and two of the most problematic provisions got fixed at the last minute. The Trust Issue Under the rules as written, any trust with any ownership interest in an SBA-backed deal would have been required to personally guarantee the loan. For investment funds (which almost universally have trusts among their LP base), this was essentially a dealbreaker. It also created real problems for anyone doing basic estate planning. The updated rule is far more workable: a personal guarantee is required only if trusts own at least 20% of the business in aggregate. At that point, all trusts must PG. It's not perfect, but it's dramatically better than what was originally proposed, and it means most fund structures can continue to participate in SBA deals. Quality of Earnings The new rules required banks to independently procure their own QoE as part of underwriting. Buyers already do QoEs, so requiring banks to hire a separate firm would have added cost, complexity, and meaningful delays to the closing timeline. The updated rule allows banks to use the buyer's QoE, provided they put a reliance letter in place or have a secondary review done by a different firm. That's a reasonable solution that keeps the intent of the requirement without doubling the work. A Few Other Technical Fixes Worth Noting Working capital true-ups in the purchase agreement will no longer be treated as seller rebates - something we and others had flagged as a problem. And for deals involving owner-occupied special purpose property, amortization can now run up to 25 years. We'll keep tracking how these rules get implemented in practice, since policy changes and lender behavior don't always move at the same speed. But this is a genuinely encouraging update. Partner Perspective: Caleb Basile, QoE Prep: What a 28-Year Broker Taught Me About What Actually Kills Deals I sat down recently with Jackie Hirsch, a broker who has been selling businesses since 1998, to talk about what she's seen derail transactions over nearly three decades. We recorded the whole conversation, and I wrote up the key takeaways on my Substack - but here's the short version. Two issues kill more deals than almost anything else. The first is revenue recognition, specifically around work in progress. For project-based and construction businesses, getting revenue into the right period is often the single largest adjustment on the entire QoE, and it's where buyer and seller disagreement most often turns fatal. The second is net working capital. Sellers hate the working capital peg because it feels like leaving money on the table. What it's actually doing is helping get the purchase price right and giving the new owner the cushion to survive the J-curve. Jackie also shared a story about a massage franchise sitting on half a million dollars in unredeemed gift cards with no expiration date - and a specialty vehicle-wrap business that took two years to untangle before it could be sold. Every deal has its version of this. On the new SBA QoE mandate: I think the practical effect is that both sides of a transaction will be leaning on quality of earnings work more than before, which should mean fewer surprises at the negotiation table. Closers get QoEs. Full piece here, and the podcast with Jackie is worth a listen too. Plus: Interesting discussion on seller price optimism and the resulting overpricing of businesses on Searchfunder here. When brokers overinflate seller expectations on the value of the business, the dominoes often fall onto the buyer when reality hits post- QoE. During our webinar with Eli Albrecht this week, he advised on ways to graciously retrade when this happens: I think it bears sharing again here, since retrades (or price corrections, as Eli advises calling them), happen all of the time. Peter Lang makes a point worth sitting with: hiring experienced advisors doesn't make you an experienced buyer, and staying above the details because "that's what I'm paying them for" means outsourcing the very work that would teach you what you're about to own. After closing, those advisors move on, and you're the one responsible for creating the value you paid for. Full post here. Question: Hit reply and tell us - Anything else you’d highlight about the SBA changes to their October 1 SOP?redacted