The SBA’s updated Standard Operating Procedure (SOP 50 10 8) effective June 1, 2025, brings a number of important changes for lenders and Certified Development Companies (CDCs). Some updates are familiar, reflecting policy shifts we’ve seen in recent SBA notices, while others are brand-new.
Below previews what’s changing and what it means for the lending community:
Changes We Expected:
- More Flexibility for 504 Debt Refinancing: The SBA has eliminated the 20% cash-out limit for 504 refinances without expansion, making it easier for borrowers to access more funds.
- Streamlined Environmental Reviews: Lenders will now review and certify environmental reports like Transaction Screens and Phase I ESAs themselves, cutting down on SBA turnaround times.
- Updated Citizenship Rules: To qualify, businesses must now be 100% owned by U.S. citizens or lawful permanent residents — a major shift impacting both the 7(a) and 504 programs.
- Bigger Size Standards: The SBA increased the alternative size standard to a tangible net worth of up to $20 million and a net income after taxes of up to $6.5 million (averaged over two years).
- Energy Projects Expansion: Thanks to a recent procedural notice, the cap on 504 energy public policy projects was lifted — allowing borrowers to pursue multiple energy projects. However, this change hasn’t been fully incorporated into the new SOP yet, and we’re awaiting final confirmation.
New Rules Introduced:
- Lowered Cap for 7(a) Small Loans: The threshold for Small Loans drops from $500,000 to $350,000.
- Higher Credit Score Requirements: Borrowers will now need a minimum SBSS credit score of 165, up from the previous 155.
- Tighter Use of PLP Authority: Preferred Lender Program (PLP) lenders are now expected to process all loans under their delegated authority unless limited exceptions apply.
- Start-Ups Must Inject 10% Cash: The SBA is bringing back the requirement that start-up borrowers contribute at least 10% equity.
- No More Refinancing MCAs or Factoring: Loans can no longer be used to refinance merchant cash advances or factoring arrangements.
- Stricter Guaranty Rules: Lenders can no longer appoint substitute guarantors — all guaranties must be directly tied to the principals at the time of application.
- Franchise Directory Returns: The SBA’s Franchise Directory is back as the go-to source for determining franchise eligibility.
- Reinstated Insurance and Tax Requirements: Hazard insurance (for loans over $50,000), life insurance for key individuals, and IRS tax transcript verifications are once again standard requirements.
Overall, SOP 50 10 8 is a clear move by the SBA to simplify processes, tighten eligibility rules, and enhance program integrity.
GLCF encourages all our lending partners to get familiar with the updated SOP as soon as possible to stay ahead of the changes. New updates are expected during the NADCO Spring Summit, and we will keep our partners in the loop.
To download SOP 50 10 8, click here. In the meantime, if you have any questions, we’re here to help!