The U.S. Small Business Administration (SBA) has released SOP 50-10-8.1, introducing updates that impact SBA 504 loan processing, eligibility requirements, and compliance procedures. The information below summarizes the key changes and clarifications lending partners should be aware of. This overview is designed to help borrowers, lenders, and referral partners understand the updated requirements and potential effects on current and future financing opportunities. For questions about how these changes may impact your specific situation, please contact a GLCF Loan Officer.
SBA has issued technical corrections to SOP 50 10 8.1, effective October 1, 2026. NADCO has provided a summary of the technical corrections most relevant to Certified Development Companies (CDCs), lending partner, and the SBA 504 Loan Program. CDCs and lending partners should review the revised SOP and redline version in their entirety for complete guidance.
Third Party Loan Underwriting
SBA clarified that for any 504 project with total project costs of at least $5,000,000, the SBA requires either the TPL’s credit memorandum or underwriting analysis to be submitted to SLPC to support the Agency’s underwriting and review of the transaction. The TPL’s credit memorandum or underwriting analysis may omit sections on additional products, services, or risk ratings. SBA has established two options for delivering this information to SBA – the CDC can obtain the TPL’s credit memorandum or underwriting analysis and include that analysis in the CDC credit memorandum when the loan is submitted to SLPC. SBA clarified that if using this submission method, no additional documentation, forms, or templates are required for the CDC to satisfy this requirement. Alternatively, the TPL may submit the credit memorandum or underwriting analysis directly to SLPC via [email protected] or through electronic submission to TPL.504box.com. SBA further explained that a direct upload feature will be incorporated into the SBA lending platform in the future. [paragraph B.1.b. on page 238] [Note – this guidance is also updated in paragraph E.1.b. on page 262]
Third Party Loan Terms – Maturity and Amortization
SBA has removed prior guidance providing that the term of the Third Party Loan may not exceed the debenture term and instead provides that the terms of the Third Party Loan are defined in 13 CFR § 120.921. [paragraph B.1.c. on page 239] SBA also removed the requirement that the amortization of the Third Party Loan may not exceed that of the 504 loan. [paragraph D.2.c. on page 260]
- Note: Based on NADCO’s conversations with SBA leadership, SBA removed this language to provide flexibility for Third Party Loan terms, including amortization, maturity, and interest-only provisions, when appropriate to the transaction, explained in the loan application, and acceptable to SBA.
SBA also restored regulatory language providing that if there is more than one Third Party Loan, an overall loan maturity must be calculated, taking into account the maturities and amounts of each loan. SBA also restored prior clarifying language providing that if there is a balloon payment, it must be justified in the loan report and clearly identified in the SBA-issued Loan System Terms and Conditions. [paragraph D.2.c. on page 260]
Credit Reports
SBA clarified that CDCs are required to obtain and review personal credit reports for all guarantors and individual affiliates who are guarantors, and individual co-borrowers. Business credit reports are not required. Additionally, credit reports are not required on non-guarantor affiliates. Credit reports must be current within 90 days of issuance of an SBA loan number or within 90 days of submission to SBA for non-delegated processing. [paragraph E.1.n. on page 269]
Personal Financial Statement
The technical corrections version of the SOP continues to provide that required Personal Financial Statements must be current within 90 days of loan approval. [paragraph A.1.e. on page 97] SBA leadership, however, has stated in recent online training presentations that Personal Financial Statements must be current within 90 days of issuance of an SBA loan number, or within 90 days of submission to SBA for non-delegated processing. This training guidance is not yet reflected in the written SOP. NADCO will continue to advocate for SBA to conform the SOP language to the guidance provided in its training presentations.
Trust Guaranties
SBA clarified that when one or more trusts (revocable or irrevocable) own, in the aggregate, 20% or more of the applicant, each trust must provide an unlimited full guaranty. The trustee must execute the guaranty on behalf of the trust and provide the certifications required under the SOP. In addition, when a trust guaranty is required, the Trustor must also personally guarantee the loan. All donors to the trust will be deemed to have Trustor status for eligibility purposes. [paragraph 3.a. on page 98]
Non-Environmental Indemnification Provisions
SBA clarified the requirements when real estate collateral is subject to an open-ended (indefinite) non-environmental indemnification provision. CDCs must review all real estate title documents (i.e., deeds or other recorded documents) that run with the land as soon as possible to identify any such provisions.
If an open-ended non-environmental indemnification provision is identified, the CDC must attempt to obtain from the benefiting party either: (1) a written waiver or release providing that the indemnification provision is not enforceable against the Federal Government or SBA; or (2) a written agreement limiting the Federal Government’s indemnification obligation to a specified amount so that the government’s maximum liability is known. Any waiver or agreement must be recorded in the land title records prior to loan closing.
If the CDC is unable to obtain the required waiver or agreement, the CDC must submit a 327 action to SLPC prior to closing. The submission must identify the benefiting party, include a copy of the applicable title provision, and document the CDC’s good-faith efforts to obtain the waiver or agreement. [paragraph E.2.a.i.d)]
IRS Tax Transcript / Verification of Financial Information
SBA clarified that for a change of ownership, the SBA Lender must verify the seller’s financial data, including a selling sole proprietor’s Schedule C. When there is an acquisition of a division or a segment of an existing business, if the SBA Lender is unable to obtain tax transcripts or financial statements that identify the division or segment being purchased, the SBA Lender must 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, etc., to verify the seller’s financial data. [paragraph B.3. on page 99]
New Business – Expansion of an Existing Business
SBA clarified that when an existing business starts another business in the same 3-digit NAICS code, with identical ownership, and the businesses are Co-Borrowers, SBA considers the transaction a business expansion rather than a New Business. The prior guidance also included businesses that were “acquired” and required the same 6-digit NAICS code. The revised guidance removes acquisitions from this provision and changes the requirement from the same 6-digit NAICS code to the same 3-digit NAICS code. [definition of New Business on page 320]
Passive Businesses
SBA clarified that EV charging stations and businesses structured as a stand-alone asset operated on a passive basis are not eligible. [paragraph 3.e. on page 23]
SBA clarified that businesses that provide a leveled model where the small business owner relies on the services of a middle level operator (e.g., cleaning service models) and do not have ownership of the contracts that support the business operation are not eligible. [paragraph 3.i. on page 24]
Prior Loss to the Federal Government
SBA clarified that the waiver for a prior loss involving a “non-controlling minority investor” applies only to prior losses incurred under SBA Agency loan programs and does not apply to prior losses involving non-SBA Federal loans, other federally assisted financing, PPP loans, SBA EIDL, or SBA COVID-19 EIDL program loans. [paragraph 15.g. on page 30]
Residential Space as Part of the Business
SBA replaced the prior example of a horse boarding facility with “livestock operation or facility.” [paragraph 1.h. on page 60]
SBA 7(a) Loan Program – While this summary focuses on technical corrections impacting CDCs and the 504 Loan Program, SBA also issued multiple technical corrections affecting the 7(a) Loan Program. CDCs actively involved in 7(a) lending should review those changes separately.
To access this TI Memo or the SBA Notice via the NADCO website, please click below.
TI Memo 26-26
NADCO Summary of Technical Corrections
SOP 50-10-8.1 with technical corrections
SOP 50-10-8.1 with technical corrections – redline version
Questions
Please contact the originating CDC with any questions regarding a specific review request, documentation requirement, or expected timeline.
