Big changes are coming to the SBA lending landscape. On June 1, 2025, the U.S. Small Business Administration’s new Standard Operating Procedure (SOP 50 10 8) officially goes into effect, replacing SOP 50 10 7.1. Whether you’re a small business owner seeking financing or a broker guiding clients through SBA 7(a) or 504 loans, understanding these updates is critical to avoiding costly missteps.
Here are the most important changes you need to know:
1. Lower Threshold for Standard 7(a) Loans
SBA has reclassified loan size thresholds:
- Loans greater than $350,000 now fall under the “Standard 7(a)” category (previously >$500,000).
- This means additional scrutiny and documentation may apply to more borrowers than before.
2. Stricter Citizenship & Immigration Rules
SBA now enforces a 6-month “lookback rule” for ownership and management:
- Any non-citizen (except green card holders) involved in the business within six months before loan approval could render the business ineligible.
- DACA recipients, visa holders, and undocumented individuals are explicitly not eligible as owners or guarantors.
3. Increased Size Standards for Small Businesses
Businesses can now qualify under a more generous Alternative Size Standard:
- Net worth cap increased from $15 million → $20 million
- Net income cap increased from $5 million → $6.5 million
4. Tougher Rules on Passive Business Models & Franchises
SBA is cracking down on business models that lease space or delegate control:
- “Salon suites,” “ghost kitchens,” co-working spaces, and similar models must derive revenue from membership, not rent.
- Franchise applicants must be listed on the SBA Franchise Directory. No listing = no loan.
- Management agreements that give full operational control to a third party (like a franchisor) will cause ineligibility.
5. More Documentation Around “Credit Not Available Elsewhere”
Lenders must fully justify SBA support by showing why the borrower can’t qualify for conventional financing. Startups especially must:
- Document any collateral or cash flow limitations
- Show why owner liquidity can’t cover the need
- Provide clear evidence of gaps conventional lenders would flag
6. Clarified Treatment of Startups, ESOPs, ROBS, and Trusts
SBA is now:
- Holding lenders solely responsible for ensuring ESOPs and ROBS structures comply with IRS and DOL rules
- Tightening rules on trusts, particularly those acting as Eligible Passive Companies (EPCs)
- Making it easier to verify startup eligibility—but harder to overlook liquidity issues
Final Thoughts
These changes are designed to tighten eligibility while expanding access to responsible borrowers. But they also raise the bar for documentation and due diligence.
At JD Capital, we’re already preparing all future SBA loan packages in full compliance with SOP 50 10 8. Whether you’re a first-time borrower or a lender navigating new rules, our team can ensure your loan submission is airtight.
📅 Effective Date: June 1, 2025
📞 Have questions? Call us at (212) 328-9141 or visit jdcapitalsolutions.com
