SBA 7(a) Feasibility Study for Start-Ups, Acquisitions and Special-Purpose Projects

SBA 7(a) is the agency's general business loan program, guaranteeing loans of up to $5 million for working capital, equipment, business acquisition, construction and owner-occupied real estate. In fiscal 2025 SBA guaranteed about 77,600 7(a) loans for $37 billion, a program record. Since July 4, 2026 a borrower who obtains a 7(a) loan first may combine it with up to $5 million of 504 financing.

The program runs on two underwriting tracks. 7(a) Small loans of $350,000 or less are underwritten on a 1.10x debt service coverage floor on a historical or projected basis, with a review of the two most recent months of bank statements. Standard 7(a) loans above $350,000 require a full lender credit memorandum and a 1.15x coverage floor, and they are where third-party feasibility studies most often appear. Business acquisitions on either track follow the Appendix 15 categories described below.

Maturities run up to 10 years for working capital, equipment and the business portion of an acquisition, and up to 25 years for real estate. For loans approved from October 1, 2026 through September 30, 2027 the upfront guaranty fee is 2% of the guaranteed portion on loans of $150,000 or less, 3% from $150,001 to $700,000, and 3.5% of the first $1 million guaranteed plus 3.75% above that on larger loans, with the fee waived on loans of $700,000 or less to manufacturers, food supply chain businesses and rural businesses.

SBA regulations do not require a feasibility study on every 7(a) loan. Under 13 CFR 120.160(b) SBA "may require" one, and SOP 50 10 8.1 sets no preparer credential or content standard. What the SOP does require is that the lender show repayment from business cash flow. When the business has operating history, the lender shows it from tax returns. When it does not, the lender needs a documented projection, and that is the feasibility study's role.

Lenders ask for a study in five situations. A start-up with no revenue history. New construction or a significant expansion that changes the revenue base. A special-purpose property where the real estate's value depends on the business. A franchise unit where the credit memorandum relies on market validation. And a business acquisition where the buyer will not continue the seller's operations, which SOP 50 10 8.1 now lets the lender underwrite as a start-up.

SOP 50 10 8.1 with Technical Policy Updates, issued by SBA Information Notice 5000-882227 on September 25, 2026 and effective October 1, 2026, rewrote change-of-ownership underwriting. Appendix 15 sorts every acquisition into one of four categories: Initial Acquisition, Business Expansion, Owner Buyout, and ESOP or Cooperative.

Initial Acquisitions, Owner Buyouts and ESOP transactions must show debt service coverage of 1.25x on historical results, measured on the last fiscal year or a two-year average. Business Expansions by an existing operator must show 1.15x. Post-closing projections no longer satisfy the floor on their own. The projection still matters, because the lender must show that the business supports the debt under new ownership, but it supports the historical test rather than replacing it.

Two exceptions keep projections at the center of the file. Where the loan finances owner-occupied special-purpose property and the collateral fully secures it, the lender may rely on projections. Where there is no clearly defined continuity of operations, the lender may evaluate the transaction as a start-up and apply start-up requirements, which means underwriting on projections. In both cases the feasibility study carries the credit decision.

The rest of Appendix 15 shapes the study's inputs. An independent Quality of Earnings report is required when the business purchase price is $3 million or more, and a report ordered by the buyer may be used with a reliance letter or a secondary review, but never one prepared by or for the seller. The equity injection for an Initial Acquisition is 10% of total project cost and cannot be reduced. Seller debt counts toward it only on full standby for the loan term, and standby debt together with other limited sources may supply no more than half. Any price above the business valuation must be covered by equity. Education, advisory and agent fees do not count. The business portion of the loan amortizes over 10 years, and the full loan may run 25 years when the acquisition includes owner-occupied special-purpose real estate whose value depends on the business.

MMCG's acquisition studies address the historical performance of the target, the quality of earnings after one-time items and owner add-backs, the post-acquisition projection under new ownership, customer concentration and key-employee risk, the buyer's industry experience, and the reconciliation of the purchase price to the business valuation.

A start-up is the most demanding 7(a) file. The lender must show repayment from a business that does not yet exist, and lenders ask for a business plan, a projection with written assumptions and monthly cash flow through the later of 12 months or three months past breakeven. The start-up contributes at least 10% equity, and every representation must reconcile to tax transcripts, which SBA verifies on every loan.

The feasibility study supplies what the operating history would otherwise supply: a defined trade area with its demographics, demand sized from peer benchmark data, a survey of existing and announced competition, a ramp curve from opening to stabilization, an operating cost structure calibrated to market-indicated expenses, and a management assessment. It demonstrates that projected coverage reaches the lender's floor within the first two years and shows cash runway at months 12, 18 and 24. For a special-purpose start-up it adds the alternative-use analysis that the going-concern appraisal relies on.

A franchise brand must be listed on the SBA Franchise Directory, which SBA reinstated with SOP 50 10 8 and carried into 8.1, and franchisors must certify their agreements for listing. Listing is maintained at the brand level and confirms eligibility; it says nothing about whether a particular unit in a particular trade area will work.

The unit-level study tests the sponsor's projections against the Franchise Disclosure Document: royalty and advertising fund structure, territory protection where granted, franchisor support and field operations, and the financial performance representations in Item 19 where the franchisor makes them. It then tests those economics against the local trade area, because an Item 19 average does not describe any one site. Sensitivity includes royalty and advertising fund increases.

A 7(a) study closes on the number the credit committee needs: global debt service coverage across the proposed SBA loan, existing senior debt, any subordinated obligations and, where the lender requires it, the guarantors' personal obligations. Lenders generally target 1.15x or better on a global basis for Standard 7(a) loans, and higher on acquisitions.

The study then stresses that number. Volume ramp is tested at 10%, 20% and 30% below base case. Pricing or revenue per unit is tested at 5% to 10% below base case. Labor cost is tested at 5% to 10% above base case. Capital cost is tested for any variable-rate component of the debt stack. Coverage is reported under each individual stress and under a moderate combined stress, with the target of retaining coverage above 1.20x under the combined case. For special-purpose projects the sensitivity extends to the alternative-use scenario. For acquisitions it includes customer concentration loss and key-employee departure.

7(a) finances the operating business as well as the real estate, so the program reaches every asset class MMCG serves: hotels and motels, gas stations and convenience stores, truck stops, car washes, RV parks, self-storage, assisted living and memory care, medical and dental facilities, gyms and sports facilities, restaurants, child care, funeral homes, wineries, breweries and distilleries, cold storage, veterinary and pet care, and bowling and family entertainment. Each asset page carries the asset's cost structure, revenue model, ramp curve, lender expectations and SBA treatment.

The asset's own loss record frames the lender's reading. Hotels, self-storage, car washes and child care have among the lowest charge-off rates in the SBA portfolio; restaurants and fitness have among the highest. A study calibrated to the asset's record tells the credit committee what to expect and shows where the subject departs from it.

Single-site SBA 7(a) business acquisitions, franchise units and smaller commercial real estate projects run $4,900 to $8,500. Special-purpose projects financed under 7(a) are priced on the special-purpose scale of $7,500 to $18,000. Multi-site portfolios are priced on a tiered basis. Hospital-scale, multi-specialty medical and other institutionally complex transactions run $15,000 to $40,000.

Standard delivery is 9 to 16 business days. Expedited delivery from 5 business days is available at a premium. Payment is 50% at engagement and 50% at delivery, with no hourly billing. Lender-requested clarifications during the approval window are made at no additional charge under MMCG's written acceptance guarantee. Proposals are returned within 12 business hours.

Request an SBA 7(a) feasibility study proposal: info@mmcginvest.com, (628) 225-1110.

The method is set out in full in MMCG's feasibility study methodology.