Key Messages
- The SBA SOP 50 10 8 is the most comprehensive change to SBA loan requirements in recent years.
- Affected rules touch on borrower eligibility, loan underwriting, and closing processes.
- New standards make it even more important to ensure both borrowers and lenders are adequately prepared.
- CDC Small Business Finance is here to guide everyone through these changes.
What SBA SOP 50 10 8 Means for Small Business Financing
The Small Business Administration’s Standard Operating Procedures (SOP) are the governing framework for lenders who offer 7(a) and 504 loans. The recent updates focus on streamlining access to SBA loans and a return to some guidelines that were in place prior to 2021.
The rule changes for SBA SOP 5010 8 are effective June 1, 2025. Now, we break down several of the major changes and what they mean for you.
Expand the Table of Contents to jump to the information most important to you
What SBA SOP 50 10 8 Means for Small Business Financing
- Increased Minimum SBSS Score for 7(a) Loans
- Requirement for Delegated Lenders to Process All Eligible 7(a) Loans
- New Mandatory Minimum Equity Injection for Start-up Businesses (7(a) Loans)
- Reintroduction of the SBA Franchise Directory (7(a) and 504)
- Ineligibility of Merchant Cash Advance (MCA) and Factoring for Debt Refinancing (7(a) Loans)
- Clarification of Eligibility for Businesses Under Management Agreements (7(a) and 504 Loans)
- Clarification of Eligibility for Businesses Leasing Space (7(a) and 504 Loans)
- Strict Citizenship and Ownership Requirements (7(a) and 504 Loans)
- Revised Requirements for Partial Change of Ownership and Seller Guarantees (7(a) Loans)
- New Rules Regarding Seller Notes as Equity Injection (7(a) and 504 Loans)
- Updates to the “Credit Elsewhere” Test (7(a) and 504 Loans)
Compliance & Closing Changes in SBA SOP 50 10 8
- Reinstatement of Tax Transcript Verification (7(a) and 504 Loans)
- Reinstatement of Hazard Insurance Requirements (7(a) and 504 Loans)
- Reinstatement of Life Insurance Requirements (7(a) and 504 Loans)
- Removal of SBA Form 601 (7(a) Loans)
- Reinstatement of Form 1050 (7(a) Loans)
- New Requirement for Minimum Closing Certifications (7(a) Loans)
Another Seminal Change: Verifying Sellers’ Financial Data (7(a) and 504)
Increased Minimum SBSS Score for 7(a) Loans
What’s New
The minimum acceptable Small Business Scoring Service (SBSS) score for 7(a) loans has been raised from 155 to 165.
The Small Business Scoring Service (SBSS) represents a scoring system which SBA and SBA lenders use to determine 7(a) loan risk. SBSS scores range from 0 to 300 with higher scores more likely to be approved.
It takes into account not only personal credit and the business’s credit history, but also factors such as time in business and industry risk.
What It Means
This change means that small business owners will need to have a higher score when applying for SBA 7(a) and SBA Community Advantage loans, and they may need to put in some extra work before going to a CDC for a loan.
CDC Small Business Finance’s Take
Raising the minimum SBSS score presents more work for businesses with low credit scores or other factors that inform their rating. It’s important to get all their ducks in a row to present the best case to the underwriters.
This is where our loan experts come in. If a small business can’t get a loan now, we’ll help them get to the point where they can.
Requirement for Delegated Lenders to Process All Eligible 7(a) Loans
What’s New
Lenders within the Preferred Lender Program (PLP) delegated authority are now required to process all loans through that channel unless SBA approval is required or a specific exception applies.
What It Means
This could mean faster decisions, as it’s designed to streamline loan processing. Alternatively, a deal with an SBSS score below 165 can’t be sent to the SBA for non-delegate processing. This reduces the number of SBA loans PLP lenders can do.
CDC Small Business Finance’s Take
These changes only reinforce our ability to work efficiently and keep applicants in the loop.
New Mandatory Minimum Equity Injection for Start-up Businesses (7(a) Loans)
What’s New
Start-ups must now contribute at least 10 percent (previously 5 percent) of the total project cost as equity. The SBA will also look more closely at how that equity is sourced.
What It Means
The SBA wants to know that new businesses have some “skin in the game.” They believe start-ups coming in with a 10 percent equity stake show a strong financial base and an increased motivation for success.
CDC Small Business Finance’s Take
From day one, our loan experts will help document what business owners have already done financially to assess if any previous investments into the company could qualify as part of their injection. We know entrepreneurs want to succeed, and we know what that takes.
Reintroduction of the SBA Franchise Directory (7(a) and 504 Loans)
What’s New
The SBA has brought back the Franchise Directory to verify franchise eligibility. Only franchises listed here are eligible for SBA financing. If the franchise isn’t on the registry, they would need to get on the registry prior to being eligible for financing.
What It Means
For entrepreneurs looking to open a franchise, it could already be listed in the directory, expediting the path to business ownership. This does not exclude borrowers from franchising outside the list, but non-listed companies are subject to review and need to go through the due diligence process to get on the list prior to being eligible for an SBA loan.
CDC Small Business Finance’s Take
We’ve helped many franchisees navigate these rules. Let us help confirm eligibility before business owners even apply.
Ineligibility of Merchant Cash Advance (MCA) and Factoring for Debt Refinancing (7(a) Loans)
What’s New
The SBA now prohibits the use of loan proceeds to refinance merchant cash advances or factoring agreements.
What It Means
The SBA wants to ensure their loans are used for more traditional forms of refinancing. Other types of high-interest financing are now outside the scope of their loan programs.
CDC Small Business Finance’s Take
Our free Small Business Advisors can help review debt and build a plan for those businesses that are almost loan-ready. Whether we find ways to refinance other debt or even just help clean up their balance sheet, there are options to make small businesses stronger.
Clarification of Eligibility for Businesses Under Management Agreements (7(a) and 504 Loans)
What’s New
The SBA updates state that if a business is operating under a management agreement it is still eligible, as long as businesses maintain control over budget and expenditure approvals, bank accounts, and employees.
What It Means
Small businesses can still contract out operations, but the SBA wants to make sure they are supporting owners who are actively involved in the management of their companies.
CDC Small Business Finance’s Take
Our loan experts have experience reviewing contracts to make certain that a company’s agreements meet the SBA standards before we even send an application to the underwriters.
We’re half way through some of the major changes. Need help breaking it all down?
Reach out to one of our loan experts to make sense of it all.
Additionally, as part of the Momentus Capital branded family of organizations, we offer a continuum of capital outside of our SBA-backed lending products, such as Impower 95 and Activate Detroit.
If you’re worried that any of the SBA SOP updates might impact your eligibility for an SBA loan, Momentus Capital offers a variety of other lending options through its continuum of capital.
Clarification of Eligibility for Businesses Leasing Space (7(a) and 504 Loans)
What’s New
The SBA loan requirements now clearly outline the criteria for businesses that lease their locations. Some examples they mention specifically are shopping centers, office suites, salon suites, ghost kitchens, and similar business models.
What It Means
The SBA’s goal is to support the growth of active small businesses operating within leased or owned spaces. This means a business is making money through the products and services they provide. SBA loans don’t provide assistance to businesses that act as property managers and generate passive income through the leasing of commercial properties.
CDC Small Business Finance’s Take
Navigating the eligibility and use-of-proceeds criteria might be a difficult area. So, whether a company leases a space or subleases to others, we can review the business model to ensure eligibility.
Strict Citizenship and Ownership Requirements (7(a) and 504 Loans)
What’s New
In order to meet SBA loan requirements, a company must be 100 percent owned by individuals who are U.S. citizens, U.S. nationals, or lawful permanent residents. Additionally, there’s a six-month lookback period to ensure domestic ownership has been in place for that time.
What It Means
A non-U.S. entrepreneur would need to ensure that the company’s ownership and documentation meet the updated citizenship requirements.
CDC Small Business Finance’s Take
We’ll walk applicants through the documents needed and explain how ownership structures impact their ability to get approved.
Revised Requirements for Partial Change of Ownership and Seller Guarantees (7(a) Loans)
What’s New
If an entrepreneur is looking to finance a partial change of ownership where they retain less than 20 percent ownership, they will be required to provide a limited guarantee for the full loan amount for a minimum of two years and be listed as a co-borrower.
What It Means
Intended to close potential loopholes, this SBA SOP rule change ensures that all parties involved in the transition have a stake in the company and assume partial responsibility for the loan.
CDC Small Business Finance’s Take
We always structure our deals in a way that makes sense. If an entrepreneur is buying into an existing business, we’ll make sure their plan is compliant and fundable.
New Rules Regarding Seller Notes as Equity Injection (7(a) and 504 Loans)
What’s New
Seller notes must be on full standby for the life of the loan to count as a 10 percent equity injection toward SBA requirements.
What It Means
If a seller is financing part of the purchase, they can’t take payments for two years if that amount is used as part of the equity injection.
CDC Small Business Finance’s Take
We’ll work with both the buyer and the seller to structure terms that make the deal work while still satisfying SBA rules.
Updates to the “Credit Elsewhere” Test (7(a) and 504 Loans)
What’s New
The SBA loan requirements reinstates that lenders should conduct a thorough analysis of whether or not a potential borrower has access to credit from other sources, including a limited personal resources test.
What It Means
The “credit elsewhere” test ensures that the SBA loans are being used to help businesses that can’t access financing from a traditional lender.
CDC Small Business Finance’s Take
We’ll assess every situation honestly and help borrowers present their case effectively.
Need clarification on one of these major changes?
Talk with one of our loan experts to see how the change affects you.
Compliance & Closing Changes in SBA SOP 50 10 8
The SBA is doubling down on risk management with several key reinstatements to previous standards. Our borrowers and lending partners can count on us to continue delivering a smooth, transparent experience — even as compliance requirements evolve.
These changes affect how your loan closes and how it’s verified.
Reinstatement of Tax Transcript Verification (7(a) and 504 Loans)
What’s New
The latest SBA SOP brings back Form 4506-C. This form states that lenders must verify business tax returns with the IRS before closing.
What It Means
This reinstatement adds to the reliability of the financial information provided, and emphasizes the SBA’s commitment to verify a business’s financial health and stability.
CDC Small Business Finance’s Take
As one of the leading small business lenders in the nation, we already have the systems and team in place to add this requirement into our workflows with no delays and to minimize any potential impact on funding timelines.
Reinstatement of Hazard Insurance Requirements (7(a) and 504 Loans)
What’s New
Businesses must once again carry hazard insurance on assets securing SBA loans exceeding $50,000; this change removes the restriction that SBA 504 loans under $50,000 must carry hazard insurance. An SBA loan can’t be approved if hazard insurance is unavailable.
What It Means
This change protects both the borrower and the lender from loss. Some loans may see some relief if they fall under the $50,000 threshold.
CDC Small Business Finance’s Take
Our loan experts will confirm hazard insurance is in place on all pledged collateral prior to closing and be aware of the risk and availability of insurance in high-risk areas.
Reinstatement of Life Insurance Requirements (7(a) and 504 Loans)
What’s New
A small or sole-owner company must meet minimum life insurance requirements before funds can be disbursed. While the specific minimums are not explicitly stated, it is generally assumed the coverage, or combination of coverage and collateral, should be equivalent to the loan amount.
What It Means
This SBA loan requirement provides a safeguard in the event of death or disability of any borrowers that are essential to the company’s ability to repay the loan.
CDC Small Business Finance’s Take
All entrepreneurs should already have life insurance in place. We’ll walk them through their options and make sure they’ve established critical, long-term protection.
Removal of SBA Form 601 (7(a) Loans)
What’s New
SBA Form 601, the Agreement of Compliance, is no longer required. The form ensured borrowers complied with federal nondiscrimination laws — including the Civil Rights Act, Equal Credit Opportunity Act, and others.
What It Means
Borrowers may no longer have to sign this document, but compliance with federal civil rights laws is still mandatory and legally binding. A company cannot discriminate in their employment practices or service delivery based on race, color, religion, sex, national origin, disability, age, or marital status.
CDC Small Business Finance’s Take
This form was a redundancy, and its removal saves time.
Reinstatement of Form 1050 (7(a) Loans)
What’s New
SBA Form 1050, the Settlement Sheet, is being reinstated. It is a document that is completed and signed when the initial loan is disbursed. It details how the SBA loan funds are to be disbursed.
What It Means
Lenders must work closely with their applicants on defining the exact use of the funds — whether it’s for buying equipment, refinancing debt, or working capital — and document it thoroughly.
CDC Small Business Finance’s Take
This is a transparent, itemized breakdown of where the dollars are going. Think of it as a roadmap, and CDC Small Business Finance will help companies find their way and avoid unnecessary delays.
New Requirement for Minimum Closing Certifications (7(a) Loans)
What’s New
The SBA has reinstated a requirement that an approved borrower sign documents at loan closing to confirm that they stand by the accuracy of the reporting, and that they agree to follow SBA loan terms.
What It Means
Lenders need to make sure certain key certifications are signed before the loan can close. While the SBA doesn’t mandate a specific form, these statements help ensure transparency and compliance.
CDC Small Business Finance’s Take
We’ll make this easy by preparing clear, compliant certification language and guiding businesses throughout the signing process.
Another Seminal Change: Verifying Sellers’ Financial Data (7(a) and 504)
What’s New
For a change of ownership, SBA lenders must verify a seller’s financial data, including a selling sole proprietor’s Schedule C, except when there is an acquisition of a division or a segment of an existing business. In that case, the SBA lender may use alternative forms of third-party verification, such as third party CPA-prepared or reviewed financial statements, sales-tax payment records, transient occupancy tax, credit reporting services, and others to verify the seller’s financial data.
What It Means
This change provides additional options for compliance with the requirement to verify seller financials. Now, CPA-prepared or reviewed statements can be used.
Historically, consolidating statements would have been required, which typically are not available, putting the deal at risk of not being able to close because the seller financials could not be verified.
CDC Small Business Finance’s Take
Lenders often struggle finding sufficient ways to verify seller financials when the selling entity consists of multiple different businesses or operations from multiple locations. With this change, lenders can simply require compiled or reviewed statements right from the start.
We’re Here to Guide You Through These Changes
While we’ve covered many of the SBA SOP updates, it’s important that you know that these aren’t the only changes introduced in SOP 50-10-8. The latest SBA guidelines have a mix of new rules, more detailed documentation, and increased lender responsibility.
But don’t worry — you’re not in this alone.
Here at CDC Small Business Finance, part of the Momentus Capital branded family of organizations, we have more than 40 years of experience with small business lending and SBA loans. No matter the changes, we’ve always been right there helping our clients and partners make sense of it all.
We stay ahead of every policy shift. We’re here to help whether you’re a start-up working toward that 10 percent equity injection, a franchise owner verifying your SBA directory listing, or a lender unsure how these changes affect your borrower’s eligibility.
Let us simplify the process, answer your questions, and provide you with the access to the capital and opportunities you deserve.
Let’s navigate these changes together. Reach out today to talk with one of our loan experts.
