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SMB Acquisitions M&A Deal Terms

Small Business Administration (SBA)Rule Changes Effective June 2025

Patrick OConnell
Patrick OConnell |
Small Business Administration (SBA)Rule Changes Effective June 2025
3:37

The Small Business Administration (SBA) has introduced several major updates to its Standard Operating Procedure (SOP) 50 10 8, which take effect on June 1, 2025. These revisions significantly impact the underwriting and approval process for SBA 7(a) business acquisition loans, offering more flexibility for borrowers and lenders alike.

For entrepreneurs, brokers, and lenders navigating SBA loan deals, understanding these updates is essential to stay compliant and structure smarter, faster transactions.

📄 Access the full SOP 50 10 8 document on SBA.gov

1. More Flexible Personal Resource Requirements

The SBA is eliminating the rigid personal liquidity and net worth thresholds that previously disqualified borrowers.

Key changes:

  • Lenders can now evaluate global cash flow, including income from spouses, rental properties, or affiliated businesses.

  • Borrowers are not required to use personal funds for business purposes.

  • High liquidity or net worth no longer serves as an automatic barrier to loan eligibility.

  • Personal financial strength can now be viewed as a positive support factor, not a disqualifier.

2. Seller Notes May Count Toward Equity Injection (With Conditions)

Seller financing can now contribute toward the required 10% equity injection, provided specific criteria are met:

  • The seller note must be on full standby for the entire loan term, with no principal or interest payments.

  • It may represent up to 50% of the total equity injection.

  • It must be properly documented using SBA Form 155 – Standby Agreement or an equivalent.

This change provides more flexibility in structuring deals while maintaining SBA compliance.

 

3. Rollover Equity and Seller Guarantee Requirements for Partial Buy-Ins

If a seller retains ownership following a transaction:

  • All new owners, regardless of percentage, must be co-borrowers on the loan.

  • If the seller retains less than 20%, they must personally guarantee the full SBA loan for two years.

This rule ensures stronger alignment and accountability in partial buy-in or rollover equity structures.

4. Partial Buy-Ins Must Be Structured as Stock Purchases

Partial buy-ins involving retained ownership must now be structured as stock purchases.

  • Asset purchase structures are no longer eligible for these types of transactions.

  • This change supports business continuity and ownership alignment, reinforcing SBA priorities around long-term operational stability.

5. CPA-Prepared Financials Accepted in Place of Tax Returns

When tax returns are unavailable or incomplete, lenders may now accept CPA-prepared or reviewed financial statements.

  • Especially useful for seasonal businesses, recently acquired firms, or those with atypical income reporting.

  • This update streamlines documentation and supports faster, more flexible loan approvals.

Conclusion

The 2025 SBA SOP 50 10 8 updates reflect the agency’s commitment to modernizing small business financing. With enhanced flexibility, greater clarity, and a broader path to loan eligibility, these revisions expand access to capital for qualified buyers and reduce bottlenecks for lenders.

To review all revisions in full, visit the official SBA website:
🔗 SBA SOP 50 10 8 Document (Effective June 2025)

Need help navigating these changes or structuring a compliant business acquisition loan? Reach out to our team for expert guidance and personalized support.

 

 
 

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