Let's face it, these new SBA rules have many people up in arms. Hopefully, your brokerage addressed them months ago and started training, and if so, that's great. But here's the next piece we may have overlooked: The listings already in our portfolio. Have we talked to those sellers about their options moving forward? Have we taken time to update those listings appropriately?
That's what we're covering today. (Shameless self-promo: yes, we build the tools business brokers need because we come from the industry..... and, we keep you informed.)
So, here we go.... (probably the most boring article I've had to write to date....)
Overview of the SBA’s SOP 50 10 8 Update
On April 22, 2025, the SBA released Information Notice 5000-866746 announcing SOP 50 10 8, effective June 1, 2025. This revision rolls back many pre-2021 underwriting standards, tightening eligibility, restoring longstanding policies, and changing deal structures, especially around seller financing, equity injections, and ownership rules.
Key Changes Brokers Must Understand
1. Equity Injection Rules Tighten
- SBA 7(a) loans require a minimum 10% equity injection from buyers.
- Seller notes can only count if they are on full standby (no payments) for the SBA loan term (typically 10 years) and may only represent up to 50% of the equity injection.
- This change dramatically reduces the flexibility around seller financing as equity injection.
2. Partial Change of Ownership Transactions Must Be Stock Purchases
- No more asset purchase structures for partial ownership deals: only stock purchases allowed.
- This affects common deal structures brokers and buyers use to manage tax and liability considerations.
3. Personal Guarantees Now Required for All Equity Holders in Partial Ownership Deals
- Regardless of equity stake size, all investors must personally guarantee the SBA loan for at least 2 years.
- For full ownership changes, investors holding less than 20% equity are exempt.
4. Seller Rollover Equity Largely Eliminated
- Sellers retaining equity must personally guarantee the loan for 2 years, effectively ending the viability of rollover equity as a flexible financing tool.
5. Flexibility on Financial Documentation
- SBA lenders can now accept CPA-prepared or reviewed financial statements in lieu of tax returns under certain conditions, reflecting modern accounting practices.
6. Underwriting Changes for Small Loans
- Loans $350,000 or less with strong Small Business Scoring Service (SBSS) credit scores can qualify for expedited processing, improving turnaround time.
7. Delegated Lender Requirements More Restrictive
- Preferred Lender Program (PLP) lenders must process most loans under delegated authority, reducing exceptions and potentially impacting flexibility in some transactions.
8. Stricter Ownership Rules for Non-U.S. Citizens
- SBA loans are limited to businesses 100% owned and controlled by U.S. citizens, lawful permanent residents, or qualified U.S. nationals.
- International buyers must prepare for thorough documentation and diligence.
9. Franchise and Other Eligibility Updates
- Franchise Directory reinstated to streamline approvals, but deals where franchisors exercise full operational control are prohibited.
- Tax transcript verification and insurance requirements restored, signaling tighter underwriting.
What This Means for Brokers and Your Listings
Educate Sellers and Buyers on the Full Scope, Not Just Seller Financing
While seller financing changes grab headlines, the new SOP affects:
- Deal structures, especially stock vs asset purchases.
- Personal guarantee requirements, which can affect investor appetite.
- Documentation standards; affecting how quickly deals close.
- Buyer eligibility, especially for international parties.
Update Your Active Listings and Marketing Materials
- Clearly note SBA compliance updates.
- Emphasize listings structured to meet new SBA requirements.
- Be ready to explain the tax, liability, and personal guarantee implications buyers face.
Prepare for More Complex Deal Negotiations
- Some deals will slow or require alternative financing solutions.
- Buyers must bring more cash upfront; seller rollover equity is much harder.
- New deal structures may impact valuations and timing.
Expand Your Financing Knowledge
- Familiarize yourself with bridge loans, private funding, and other options buyers might explore.
- Build relationships with SBA lenders knowledgeable about SOP 50 10 8.
Be Proactive With Your Clients
- Reach out to sellers with active listings to review and update terms.
- Manage expectations around deal pace and financing.
- Position yourself as the expert guiding clients through these changes.
Trusted Resources for Brokers on SBA SOP 50 10 8
Final Thoughts
The SBA’s June 2025 SOP 50 10 8 update isn’t just a tweak, it’s a fundamental shift that affects deal structures, financing, eligibility, and underwriting.
Brokers who fully understand these changes and proactively communicate with their clients, updating listings, managing expectations, and offering creative financing insights will emerge as trusted advisors and maintain deal flow in this new environment.
At Elite Business Exchange, we don't just give brokers a platform. We give them the tools, insights, and strategic edge to stay sharp: week after week. Elite Business Exchange was built for brokers, by brokers. We built it from real world experience for those who lead the deal.
Marcus Inman Founder: Elite Business Exchange:
marcus.inman@cnhstrategies.com
