On April 22, 2025, SBA issued Information Notice 5000-866746 announcing the issuance of the much-anticipated SOP 50 10 8. Per the Notice, this revised SOP which becomes effective on June 1, 2025 largely reinstates “requirements that were in place before January 2021, including restoring 7(a) underwriting criteria, reinstituting the SBA Franchise Directory with streamlined procedures, re-affirming that SBA Lenders determine whether the Applicant is eligible for a loan guaranteed by SBA, and eliminating the “do what you do” philosophy from the SOP.” Although the changes are sweeping from the SOP 50 10 7.1, many of the changes revert SBA guidelines to previous and familiar SBA requirements.
Highlights of the new SOP include:
Requiring all lenders with delegated (PLP) authority to process all loans under their delegated authority with the exception of loans to refinance same institution debt and International Trade loans where lien securing the collateral will not be in first position;
Decreasing the maximum loan size for 7a small loans from $500,000 to $350,000 and increasing the minimum acceptable SBSS score for 7a small loans from 155 to 165;
Restoring the requirement for a 10% minimum cash injection for loans to start-up businesses;
Making merchant cash advance (“MCA”) and factoring arrangements ineligible for debt refinancing;
Disallowing multi-step partial change of ownership transactions;
Clarifying the criteria for evaluating the eligibility of businesses operating under a management agreement;
Clarifying the eligibility criteria for businesses that lease space such as shopping centers, office suites, salon suites, ghost kitchens and similar business models;
Clarifying that loan applicants with an existing delinquent SBA loan are not eligible for approval of additional financing;
Further clarifying the new guidelines regarding businesses owned by non-citizens to clarify that although businesses owned by properly documented Legal Permanent Resident (“LPR”) aliens are eligible, businesses owned by conditional LPRs are not eligible;
Reinstating the Franchise Directory – Franchises listed on the directory as of 5/11/2023 will have until 7/31/2025 to execute the SBA Franchisor/Distributor Certification to maintain their listing on the directory;
Lenders are again responsible to analyze whether some or all of a loan is available from the applicant or owners of 20% or more of the applicant (“Credit Elsewhere”);
Removed the ability to provide a “substitute guarantor” in place of SBA required guarantors (supplemental guarantees are still permitted);
Reinstated the tax transcript verification requirement for all loans;
Reinstated the hazard insurance requirement for all loans over $50,000;
Reinstated minimum life insurance requirements;
Requiring sellers in a partial change of ownership to provide a limited guarantee of the full loan amount for a minimum of 2 years after disbursement, regardless of the amount of ownership retained;
Clarifying that seller debt may only be counted as equity injection if on standby for the full term of the loan and does not exceed 50% of the required injection;
Reinstating the requirement for SBA Form 1050;
Removing the requirement of SBA Form 601; and
Requiring certain minimum closing certifications from all Borrowers.
This list of changes is a non-exhaustive summary. Lenders are admonished to fully read and understand the new SOP before it becomes effective on June 1, 2025. Additional clarifications will likely be forthcoming from SBA as the industry digests these program updates over the coming weeks.
For more information about these significant program changes, contact the SBA compliance attorneys at Starfield & Smith at 215-542-7070 or info@starfieldsmith.com.