Key SBA Changes (Effective June 2025)

The SBA has implemented sweeping rule changes effective June 2025 that significantly impact how lenders structure, underwrite, and process loans. From stricter "Credit Elsewhere" requirements to seller guaranties, these updates reshape the SBA lending landscape for both business Buyers and Sellers.

Credit Elsewhere Test

• Now requires detailed narratives showing borrowers cannot get reasonable financing elsewhere.

• Must analyze personal liquidity of every 20%+ owner (including spouses and children).

• Missing documentation can result in denial of SBA guaranty.

Equity Injection

• 10% equity requirement reinstated for startups and ownership changes.

• Seller financing only counts if fully on standby for the loan term, capped at 50% of equity injection.

• Sellers retaining equity must personally guarantee the full loan for two years.

Small Loan Thresholds

• Reduced from $500K to $350K.

• More loans require full underwriting.

• Minimum SBSS score raised from 155 to 165.

Franchise Directory

• SBA Franchise Directory reinstated.

• Franchisors must complete SBA certification by December 31, 2025.

• Starting January 1, 2026, uncertified franchises will not qualify for SBA financing.

• SBA Franchise Identifier Codes reintroduced, eliminating case-by-case determinations.

System and Compliance Updates

• Ownership disclosure: E-Tran now requires 100% ownership information, with DOBs for individuals and formation dates for entities.

• OFAC checks: Mandatory screening of all applicants, guarantors, and owners against Treasury sanctions lists.

• CAIVRS checks: Required for all lenders, including CDCs.

• Hazard insurance: Required for 7(a) loans starting at $50K (down from $500K).

• Tax transcripts: Form 4506-C verification mandatory; if IRS records not found, proof of filing and payment required.

Construction Lending

• Performance bond threshold lowered from $500K to $350K.

• Enhanced oversight required: performance bonds, payment bonds, builder’s risk insurance, and funds control on disbursements.

• DIY projects allowed but require multiple bids/estimates and enhanced due diligence.

504 Loan Program

• Environmental assessments streamlined for clean properties; CDCs can approve directly in E-Tran.

• Environmental reports must be dated within one year of SBA loan number issuance.

• Elimination of $16.5M cap for Energy Public Policy Projects, enabling larger renewable energy financings.

  
  

SUMMARY OF CHANGES AND NEW RULES