The Small Business Administration (SBA) released its updated Standard Operation Procedures (SOP) document on April 22, 2025, with updated rules going into effect on June 1, 2025. 

This impacts both small businesses, as well as lenders looking to lend to qualifying businesses. 

Here’s what you need to know about the doc, and what updates could impact you. 

Changes in the 2025 SBA SOP Update 

The Trump administration has been critical of the SBA’s performance under the last administration, stating its changes “will eliminate a package of Biden-era policies which dramatically reduced underwriting standards within the 7(a) loan program, sacrificing its financial integrity and driving up taxpayer liability.” 

It added that “the program saw a massive rise in defaults and delinquencies – which the agency was unable to cover due to decreased fee income. By 2024, the 7(a) loan program had a negative cash flow of about $397 million – the first instance of negative cashflow in 13 years.” 

With Kelly Loeffler now in charge, the SBA is taking a stricter stance to who they dole out funds too. Here are a few adjustments from the previous SOP: 

New Structure: The SOP is now split into three separate sections. 

  • Section A: Core requirements for all SBA 7(a) and 504 loans 
  • Section B: 7(a) program-specific guidance 
  • Section C: 504 program-specific guidance 

Affiliation Rules Simplified 

  • Affiliation determined by ownership percentages only 
  • "Control" is no longer part of the affiliation test, it’s only determined by ownership percentages 

Clarified Ineligible Businesses 

  • Ghost kitchens and salon suites operating as passive rentals are now ineligible 
  • Apartment buildings without medical/nursing services are ineligible 

Underwriting and Documentation Updates 

  • Tax transcript verification reinstated for all loans 
  • Hazard insurance required for loans over $50,000 
  • For partial changes of ownership, sellers must guarantee the full loan amount for at least 2 years 
  • Seller debt counts as equity injection only if on full standby for the entire loan term 

Digital and Process Innovations 

  • Clear guidelines issued for electronic signatures (lenders responsible for authenticity) 
  • Franchise Directory use expanded — no need to review franchise agreements if the brand is listed 
  • Consolidated environmental documentation guidance for certain industries (e.g., gas stations) 

The overall impact and aim from the new SBA leadership is to streamline the application process, while also moderately increasing the barrier to entry to improve the quality of loans. Additionally, it’s pushing more lender responsibility for compliance and internal record-keeping. 

Note, this is not an exhaustive list. You can find the new SBA SOP document here. 

How These Changes Will Affect Lending Practices 

These tighter underwriting practices will likely slow down SBA lending marginally, but streamlined efforts could potentially negate any losses. Keep in mind that the 24-month standby restrictions on seller financing, a common tool for acquisition entrepreneurs, will likely reduce demand for SBA 7(a) loans among buyers with limited cash.  

Lenders will likely need to refocus their collective efforts on these tasks to maintain their SBA loan pipeline. Here’s what you need to know, and how to stay ahead of the recent changes. 

Compliance and Monitoring:  

  • Update loan checklists and retrain staff on new rules for affiliation, tax transcripts, hazard insurance, and equity injection. 
  • Strengthen documentation and guarantees for partial ownership sales and seller-financed equity injections. 
  • Tighten internal compliance processes for electronic signatures, exception requests, and SBA record retention. 

Embrace Digital Standards: 

  • Update loan checklists and retrain staff on new rules for affiliation, tax transcripts, hazard insurance, and equity injection. 
  • Strengthen documentation and guarantees for partial ownership sales and seller-financed equity injections. 
  • Tighten internal compliance processes for electronic signatures, exception requests, and SBA record retention. 

Final Thoughts 

The SBA’s updated SOP 50 10 8 brings important changes for both borrowers and lenders, with the aim of making loans for small businesses while minimizing risk. By streamlining eligibility processes, reinforcing underwriting standards, and tightening documentation requirements, lenders can ensure smoother operations, reduce risk, and more well-performing assets.