Then: can the future numbers fund it? Now: can the history defend the debt?
On October 1, 2026, SBA’s updated lending rulebook, SOP 50 10 8.1, took effect for 7(a) and 504 applications that receive an SBA loan number on or after that date. It builds on SOP 50 10 8 (June 2025), which had already reversed many of the looser 2023 rules. If your business has real historical earnings, you can still qualify. The bar is just clearer, and it sits on your past results.
What Is SBA SOP 50 10 8.1 and When Does It Apply?
SOP 50 10 is the SBA’s procedures manual for 7(a) and 504 lending. Version 8.1 was published August 14, 2026 and reissued with technical updates on September 25, 2026. It applies to applications numbered on or after October 1, 2026. Earlier applications stay under SOP 50 10 8. It also folds in notices issued during 2026 on citizenship, the SBSS score, and loan limits.
Buying a Business: Projections Can’t Carry the Deal
Acquisitions now fall into four categories: Initial Acquisition, Business Expansion, Owner Buyout, and ESOP/Co-op. Debt coverage must be met on the last fiscal year-end or a two-year average, on a historical or adjusted basis.
– First-time buyers: 1.25x
– Expansions by an existing business in the same four-digit industry group: 1.15x
Expect three years of financials at the highest level of reporting you have, interim statements for both businesses, and tax transcript verification. Narrow exceptions exist, such as special-purpose properties where the real estate fully secures the loan.
Equity Injection and Seller Notes
Startups and first-time buyers need at least 10% of total project cost. For first-time acquisitions, that 10% can’t be reduced. A seller note counts toward it only on full standby, meaning no principal or interest for the life of the SBA loan. Standby debt, standby seller notes and minority investors together can cover no more than half of the required equity. A seller note can be refinanced only after it has been paid and current for 36 months.
For expansions and owner buyouts, the lender may reduce the 10%, but only with documented liquidity and a non-negative year-end net worth, and with no dedicated working capital in a 7(a) term loan within 90 days.
Partial Buyouts and Owner Buyouts
- An outsider who hasn’t worked in the business for 24 months can buy less than 50% and can’t become the largest owner. Otherwise first-time-buyer standards apply.
- Every new owner, even at 1%, signs as a co-borrower.
- A seller who keeps less than 20% guarantees the loan for at least two years.
- Multi-step partial structures aren’t eligible.
One improvement: a departing seller can now consult for up to 24 months.
Credit Elsewhere, Personal Resources and Credit Scores
Lenders must spell out the specific reasons you don’t fit conventional lending, and a credit score alone isn’t one of them. They also review the liquidity of anyone owning 20% or more, with reasonable reserves allowed for things like retirement and education. On March 1, 2026, SBA retired the SBSS score for 7(a) Small loans, so those loans now get a full credit review, including recent bank activity.
Citizenship and Ownership
Since March 1, 2026, 100% of owners must be U.S. citizens or U.S. nationals whose principal residence is in the U.S. Lawful permanent residents can no longer hold any ownership share. Ineligible owners must fully divest before the loan number issues, and there is a six-month lookback.
Franchises
The brand must be listed on the SBA Franchise Directory. Arrangements where the franchisor or a manager controls the business aren’t eligible.
Startups
Startups (in operation one year or less) can still qualify on detailed projections showing 1.15x within two years, with at least 10% equity and a 1:1 global cash flow.
SBA 504: Occupancy, Injection and Bank Loan Terms
- Existing building: occupy at least 51%.
- New construction: occupy 60% at the start and 80% within 10 years.
- Contribution: 10% for most projects, 15% for a new business or special-purpose property, 20% for both.
- New in 8.1: the bank loan in a 504 may amortize longer than the debenture.
See SBA 504 loans.
What Got Easier
- Seller transition periods of up to 24 months.
- Internal valuations for Small and Express acquisitions at $350,000 or less.
- Lenders may refinance their own debt under delegated authority.
- More flexible SBA Express lines.
- Working-capital true-ups no longer count as seller rebates.
How to Prepare
- Gather three years of returns and financial statements, plus current interims.
- Document where your down payment comes from.
- Confirm every owner’s citizenship.
- If a seller note is involved, agree on full-standby terms before you sign the purchase agreement.
Start with SBA loans, SBA 7(a) loans or SBA startup loans.
FAQ
When did SOP 50 10 8.1 take effect?
October 1, 2026, for applications that receive an SBA loan number on or after that date.
Can I still use projections?
For startups and some new businesses, yes. For buying an existing business, lenders must meet coverage on historical or adjusted year-end results.
Can a seller note be my down payment?
Only partly. It must be on full standby for the life of the loan and can cover at most half of the required equity.
Can green-card holders get SBA 7(a) or 504 loans?
Not as owners, since March 1, 2026. All owners must be U.S. citizens or U.S. nationals living in the U.S.
What is the 504 occupancy rule?
51% for an existing building. For new construction, 60% at the start and 80% within 10 years.
Does a good credit score guarantee approval?
No. Lenders review full credit history, cash flow, and why conventional credit isn’t available.
Sources: SBA SOP 50 10 8.1 and SBA Policy/Procedural Notices 5000-876441, 5000-876626 and 5000-876777 (see RESEARCH.md for links and page numbers).
Call Kevin (480) 915-8690 to discuss your situation.
Subject to credit approval. Terms vary. This is not a commitment to lend.
Want my funding tips first in Google? Add 75BizLoans as a preferred source.
