Best Practices: SOP 50 10 8.1 is Coming: A Friendly Guide for SBA Lenders

Mark your calendar and refresh your checklists.  SOP 50 10 8.1 becomes effective October 1, 2026. The new SOP includes some significant changes.  The new SOP folds in the numerous procedural notices SBA has issued since SOP 50 10 8.0 and keeps building on that version’s reintroduced lending criteria, so most of what you already learned still applies. But below are some highlights of the new policy changes.  Lenders should familiarize themselves with the exact language added to the new SOP and be on the lookout for further guidance and possible technical corrections coming from SBA prior to the October 1, 2026 effective date.

In what many people would consider a further substantive change to eligibility, Section A, Chapter 1, Paragraph F has been renamed from “Businesses Owned by Non-U.S. Citizens” to “Citizenship and Residency Requirements,”. Legal Permanent Residents are no longer eligible to hold any ownership interest in an Applicant/Borrower, OC, or EPC, and 100% of direct and indirect owners must now be U.S. Citizens or U.S. Nationals with a Principal Residence in the U.S., its territories, or possessions. All entity owners must be created, organized, or incorporated in the United States.

No loan may be made if any direct or indirect owner or SBA-required guarantor is an Ineligible Person, and a six-month lookback will render the business ineligible if any such owner was an Ineligible Person within six months before the loan number was issued (absent complete divestiture from the borrower).

Ineligible Persons, other than undocumented aliens, may provide a limited guaranty only where it’s required to support a pledge of jointly held collateral, and undocumented aliens may not be an officer, director, or employee of the Applicant.

Previously, in Procedure Notice 5000-872050, the SBA allowed for a small 5% foreign ownership interest exception,.  The new SOP now reflects a stricter 100% standard.  “Principal Residence” is now defined by reference to IRS Publication 523, and documentation for U.S. Nationals must include a birth certificate and/or passport in the loan file with the SSN entered in the SBA Loan System.

Another substantive change in the new SOP involves Changes of Ownership which are now addressed in Appendix 15 to the SOP.  There are now four transaction categories;  Initial Acquisition, Business Expansion, Owner Buyout and ESOP and Cooperative.  This is one of the section of changes that credit underwriters should pay extra careful attention to in their review of the new SOP.  Each transaction category has its own equity injection, debt service and valuation standards.

For owner buyouts, at least one member of the original ownership must remain and guarantee the loan regardless of post-sale percentage, and individuals not currently employed by the business may acquire only less than 50% of total equity and may not become the largest direct or indirect shareholder (with indirect interests aggregated with direct).  Deals that fail those tests must be processed as an Initial Acquisition which has more stringent underwriting requirements than some other acquisitions.

Some other updates related to Change of Ownership section that are noteworthy are:

• The seller-consultant period has been extended from 12 to 24 months in the aggregate, including extensions.
• 7(a) Small Loans can no longer be used for change of ownership transactions.
• Certain business purchase transactions over $3 million will require an independent Quality of Earnings report.

While this article is not an exhaustive list of the changes, a few other topics of note are:

• IRS transcripts. When a transcript for an amended return is unavailable, the Lender must obtain the signed amended return plus evidence of filing (IRS Acceptance Report, USPS Form 3800, certified-mail return receipt, USPS delivery confirmation, IRS-stamped return, or an accountant/CPA letter).
• Trust ownership. The guaranty trigger for entity ownership by a trust moves from “20% or more” to “any percentage,” with the trustee executing on behalf of the trust and, if revocable, the Trustor personally guaranteeing.
• 504 franchise review. CDC Closing Counsel now certifies the legal sufficiency of franchise documents via the revised Opinion of CDC Counsel when submitting the closing package to local District Counsel, and SBA Form 2268 requires that opinion as Appendix D.
• New maturity limitations. These limitations are applicable to change of ownership and mixed purpose loans that also finance commercial real estate. You can read more about this in last week’s article- Best Practices: August 26, 2026

Lenders now have approximately one month to familiarize themselves with the new SOP to make sure they have updated their internal policies and procedures to comply with all of the new requirements in order to ensure they are protecting their SBA guaranty.

For more information about these and other significant program changes and assistance in updating policies and procedures, contact Starfield & Smith at 215-542-7070 or info@starfieldsmith.com. Stay tuned to Starfield & Smith for additional updates on SOP 50 10 8.1.