The SBA has started running the job-or-asset test for you. Since October 1, 2026, a first-time buyer using an SBA 7(a) loan to buy an existing franchise has to show that the unit's past earnings cover the new loan payments 1.25 times over, up from 1.15, and a forecast no longer counts toward that number. A resale that pays its owner a decent wage and nothing more will not clear it.
That is a bigger change for franchise resales than the small step in the ratio suggests. Many single-unit resales are sold on what the store could do once a motivated new owner takes over. The new rule says the loan has to work on what the store already did.
What changed on October 1
The SBA rewrote its rules for buying a business and put them in one place. The new lending manual, SOP 50 10 8.1, was issued on August 14, 2026 and applies to every loan that receives an SBA loan number on or after October 1, 2026, whatever date you applied (SBA Information Notice 5000-880695). Purchases now fall into four types, and the type decides the terms.
A first-time franchise buyer is almost always an “initial acquisition.” The manual defines that as a new majority owner who was not previously an owner or employee of the business (Starfield & Smith, September 2026). For that buyer, five things now apply:
| Rule | Before October 1 | Now |
|---|---|---|
| Coverage of loan payments | 1.15x | 1.25x |
| Earnings used for the test | Projections could help make the case | Last fiscal year or a two-year average. Projections cannot be used. |
| Cash you put in | 10% | 10% of total project cost, and the lender cannot reduce it |
| Streamlined “7(a) Small” loans | Allowed | Not allowed for any change of ownership |
| Independent earnings review | Lender's choice | Required when the business price is $3 million or more, not counting real estate you will occupy |
Seller financing still helps, with a string attached. A seller note can count toward your equity only if the seller agrees to take no payments for the life of the SBA loan, according to FRANdata's summary of the franchise-lending changes. Ask your lender how much of the 10% a note may cover before you negotiate one.
Why 1.25 is a job-or-asset test
Coverage is measured after the owner gets paid. A lender starts with what the unit earned for its current owner, subtracts a salary for you (or for the manager who would replace you), and divides what is left by a year of loan payments. The new manual accepts adjustments to officer compensation only when they are documented and supported, so the math cannot be made to work by assuming you will work for free.
That is the same line we draw in every brand file. A unit that produces one person's pay is a job. A unit that produces one person's pay plus a surplus is an asset, and only the surplus can service debt. We laid out that distinction in Job, Asset, or Trap? as an opinion. For leveraged resales it is now an underwriting rule.
The cost of the stricter test is easy to work out. On a 10-year loan at an illustrative 10% rate, each $100,000 borrowed costs about $15,900 a year. At 1.25x the unit must show about $19,800 of surplus for each $100,000, compared with about $18,200 under the old rule. Put the other way round, each dollar of proven surplus now supports about $5.04 of loan instead of $5.48. The same store qualifies for roughly 8% less debt than it did in September.
A resale, run through the test
A $400,000 resale now needs to have earned about $131,000 for its owner last year. Put 10% down and borrow $360,000 on the same illustrative terms. Annual payments come to about $57,100. Multiply by 1.25 and the lender needs $71,400 of surplus. Add a $60,000 salary for you and the unit must have produced about $131,400 in owner earnings, on its tax returns, before you ever saw the listing. Under the old rule the bar was about $125,700, and a believable forecast could help cover a shortfall.
You can run this in two minutes on any listing:
- Take the seller's real owner earnings from last year's tax return, or the two-year average. Ignore the broker's “potential.”
- Subtract what you need to be paid, or a manager's salary if you will not work the counter.
- Multiply what is left by 5. That is roughly the largest SBA loan the unit supports at 10% over 10 years.
- If the asking price minus your down payment is higher than that, the deal needs a lower price, more cash, or a different store.
What that does to brands we cover
The brands we rate as jobs support very little debt, and the ones we rate as scalable assets support a lot. The table applies the same formula to our own estimates of what one unit pays an owner-operator before salary, with $60,000 set aside for the owner's pay. These are our labeled estimates for a typical unit. A lender will use the actual books of the store you are buying, which can sit above or below the range.
| Brand | Our estimate: one unit, before owner pay | Loan supported at the low end | Loan supported at the high end |
|---|---|---|---|
| Subway | $20,000 – $70,000 | none | $50,000 |
| Rita's Italian Ice & Frozen Custard | $25,000 – $75,000 | none | $76,000 |
| The UPS Store | $45,000 – $110,000 | none | $252,000 |
| Jimmy John's | $50,000 – $130,000 | none | $353,000 |
| Taco Bell | $70,000 – $180,000 | $50,000 | $605,000 |
| Wingstop | $200,000 – $400,000 | $706,000 | $1,715,000 |
A cheap resale is often cheap because it fails this test. Subway resales are plentiful and inexpensive, and at our estimate even a strong single shop leaves very little after the owner's pay to service a loan. Stores like that tend to change hands for cash, on seller terms, or to existing operators. A first-time buyer who needs 90% financing is the buyer the new rule turns away, and that is worth knowing before you fall for a listing price.
The rule also tilts the resale market toward people who already own units. An existing franchisee buying another location in the same line of business after two or more years of operating counts as a “business expansion” and still qualifies at 1.15x. That lines up with the “asset if scaled” verdict we give brands like Wingstop and Taco Bell: the second store is easier to finance than the first. When you bid on a good resale, expect to compete with operators who can borrow more against the same earnings than you can.
What to ask before you make an offer
The seller's tax returns matter more than the FDD at this stage. Item 19 of the disclosure document reports system-wide sales, and it is still the first thing to read, but the lender will not underwrite an average. Ask for two years of the unit's federal returns and its profit-and-loss statements before you sign a letter of intent, and run the four steps above on those numbers.
Three more questions save time:
- What coverage does your lender actually want? 1.25x is the SBA's floor. FRANdata notes that many lenders will ask for 1.5x on their own.
- Is the brand on the SBA Franchise Directory? A franchise has to be listed to be eligible for SBA financing at all.
- What does the transfer cost? Ask the franchisor for its transfer fee and any remodel or training it requires of a new owner, and ask your lender which of those count toward the project cost your 10% is measured against. Our guide to financing a franchise covers the rest of the stack.
If the unit only clears the test when you pay yourself nothing, the SBA has told you what you are buying. Either negotiate the price down to what the surplus supports, or keep looking for a store whose history carries the loan and your salary at the same time. Our affordability calculator shows the same gap from the cash-flow side.
This is general information, not lending or legal advice. Loan terms, rates, and lender requirements vary; confirm the current rules in SOP 50 10 8.1 with an SBA lender before you rely on them.