It’s no secret that SBA loans, specifically 7(a) loans, have become one of the most popular financing options for small business buyers—and it’s easy to see why. These loans are designed to be more assessable for small business owners than traditional bank loans. They often require a lower down payment, come with longer repayment terms, and have more flexible qualification criteria, especially for newer business owners or those with less-than-perfect credit.
Under the CARES Act, these already-relaxed standards were eased even further to help businesses survive the COVID-19 pandemic. In 2023, the SBA issued SOP 50 10 7 under the Biden administration, which continued and formalized many of the borrower-friendly policies. While this made it easier for more businesses to be sold and financed, it also contributed to a significant rise in loan defaults.
However, starting June 1, 2025, SOP 50 10 8 will change the way lenders evaluate candidates for SBA 7(a) loans. As anticipated, this updated guideline brings back many of the stricter policies that were in place during the early years of the Trump administration. If you’re considering applying for an SBA 7(a) loan after June, here are the key changes you should be aware of.
The Franchise Directory Returns
Not all franchises are created equally. Some are structured to allow franchisees significant autonomy, while others have such strict operational rules that the SBA does not consider them independently owned and operated—which is a key requirement for SBA loan eligibility. To streamline the loan approval process, the SBA created the Franchise Directory, an official list of pre-approved franchises that meet eligibility standards. This directory encompassed over 2,500 franchise brands, with new brands constantly added.
The Franchise Directory was eliminated in 2023 in an effort to reduce bureaucracy and give lenders more flexibility. However, instead of simplifying the process, this shift led to confusion and inconsistencies, as many lenders were unsure exactly how they should assess franchise eligibility on their own. In some cases, it even allowed questionable franchises to bypass proper review.
SOP 50 10 8 is reviving this directory in June to restore clarity, consistency, and confidence for both lenders and franchise buyers.
10% Downpayment Requirement
The general rule-of-thumb for SBA 7(a) loans has always been putting 10% down as a downpayment, especially for business acquisitions. Yet under SOP 50 10 6 and 7, many lenders used a few unconventional workarounds and broad interpretations to help buyers avoid this requirement. These practices, while technically allowable under the previous guidance, often resulted in under-capitalized deals that increased the chances of default.
SOP 50 10 8 aims to close these loopholes. Moving forward, buyers will be required to contribute at least 10% of the total project cost, and any seller notes used to meet this requirement must be on full standby. These changes are intended to restore the integrity of the equity insertion requirement and ensure that all SBA-backed deals are built on a stable financial foundation.
Change in Loan Size Definitions
SOP 50 10 8 will also redefine what gets considered a “small loan” within the SBA 7(a) loan program. Under the new regulation, any loan under $350,000 will now fall into the “small loan” category. Previously, this classification included loans up to $500,000.
While this may seem like a small change to some, it has important implications for both borrowers and lenders. Small loans boast simpler underwriting and documentation requirements. In some cases, those with lower credit scores can qualify for a small SBA loan. By lowering the threshold, this guideline effectively reduces the number of loans that qualify for this simplified process.
More Rigorous Financial Checks
As aforementioned, the stricter 10% downpayment requirement will shut down a variety of loopholes that previously allowed buyers to contribute little or no real equity. But this is just the tip of the iceberg.
Under the “Do What You Do” policies, lenders had the flexibility to treat SBA loans like their regular loans—rather than following the SBA’s lengthy checklist of standard requirements—as long as they acted consistently with how they normally approved business loans. However, not all lenders follow the same rules. Therefore, this created many discrepancies across SBA lenders as a whole.
SOP 50 10 8 will also restore a more thorough review of a business’s financial health before a loan is approved. This will include a renewed emphasis on cash flow verification— a process that ensures the business has historically generated enough income to comfortably cover the new debt. Lenders will no longer be able to rely on projections or inflated add-backs to justify the loan.
To support this review, the SBA will be reinforcing the use of verified financial documents, including:
- IRS transcripts (4506-C forms)
- Business financial statements, such as profit & loss statements, balance sheets, and cash flow reports
- Bank statements
Stricter Citizenship Verification
To increase lender accountability and safeguard program integrity, SOP 50 10 8 will tighten back up the citizenship and residency verification process. This updated measure is designed to ensure only eligible applicants—specifically U.S. citizens, lawful permanent residents, and certain non-citizen entrepreneurs—can receive SBA 7(a) loan funds.
Under this new guideline, lenders will be required to verify the immigration status of all non-citizen applicants with U.S. Citizenship and Immigration Services. These applicants must complete SBA Form 912 and SBA Form 1919, and provide current, valid documentation supporting their eligibility.
For U.S. citizens, proof of status must include a U.S. passport or Certificate of Naturalization.
In cases where an applicant’s legal status cannot be confirmed or documented, the SBA loan cannot be approved. This measure is intended to ensure consistent enforcement across all lenders.
Looking to Buy a Business with an SBA 7(a) Loan?
You’re in the right place! At Sigma Mergers and Acquisitions, we don’t just help people buy and sell businesses across the United States; we’re also here to help you through the entire financing process, especially with the new SBA SOP 50 10 8 changes. Our experienced team works closely with a trusted network of banks who understand the latest requirements inside and out.
Ready to take the next step? Connect with us today to schedule a consultation and start exploring your options.