SBA Procedural Notice 5000-872764: Revisions to SOP 50 10 8 – 504 and 7a Loan Program Updates
Summary
SBA Procedural Notice, Control No. 5000-872764, effective September 30, 2025, to SBA employees, 7(a) lenders and certified development companies, on revisions to SOP 50 10 8 with 504 and 7a loan program updates. It updates SBA Standard Operating Procedure (SOP) 50 10 8 based on feedback from 7(a) lenders and CDCs; where revisions are not included, the previously published guidance remains. Its first update concerns the definition of New Business.
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SBA Procedural Notice
TO: All SBA Employees, 7(a) Lenders and CONTROL NO.: 5000-872764
Certified Development Companies
EFFECTIVE: September 30, 2025
SUBJECT: Revisions to SOP 50 10 8 – 504 and 7a
Loan Program Updates
The purpose of this Notice is to update SBA Standard Operating Procedure (SOP) 50 10 8 based
on feedback received from 7(a) Lenders and CDCs. Where revisions are not included, the
guidance remains as previously published in SOP 50 10 8.
A. Updates to the 7(a) and 504 Loan Programs
1. Update to the definition of New Business, and clarification on business expansions:
SBA is revising the definition of New Business to remove “in the same geographic area as the
acquiring entity” in the eligibility criteria to distinguish between a new business and a business
expansion.
Accordingly, the definition for New Business is found in Appendix 3: Definitions (page 408),
which applies to both the 7(a) and 504 Loan Programs, and is revised to read as follows:
“New Business: (7(a) and 504) A business that has been in operation for 2 years or less at the
time the loan is approved. A business that has been in operation for more than 2 years at the time
the loan is approved may be considered a New Business if it is a change of ownership that will
result in new, unproven ownership/management and increased debt unrelated to business
operations.
If there is a change of ownership, the CDC must review the management and level of debt in
order to decide whether an additional Borrower’s contribution of 5% is necessary. Operations are
deemed to begin when the business begins generating regular recurring revenue from its intended
operations.
When an existing business starts or acquires a business that is in the same 6-digit NAICS code
with identical ownership, and they are Co-Borrowers, SBA considers this to be a business
expansion and not a new business.”
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In addition, the Notes in Section B, Chapter 1, Paragraph C.2.b.iii.b) (page 134) and Section B,
Chapter 2, Paragraph C.2.a.ii.b)ii)(b) (page 171) are revised to read as follows:
Note: When an existing business starts or acquires a business that is in the same 6-digit NAICS
code with identical ownership, and they are Co-Borrowers, SBA considers this to be a business
expansion and not a new business. “Same geographic area” means the acquiring entity is located
within a reasonable distance of the subject business, allowing management to exercise similar
daily control over both locations.
B. Updates to the 7(a) Loan Program
1. Upfront Fee Calculation for Multiple 7(a) Loans Within 90 Days
As first introduced in SBA Information Notice 5000-872051, 7(a) Fees Effective October 1,
2025 for Fiscal Year 2026 and 90-Day Rule Clarification (Effective August 28, 2025), SBA is
revising the rules for multiple 7(a) Loans made within 90 days to exclude the Working Capital
Pilot (WCP) and Export Working Capital Program (EWCP) from being combined with other
7(a) loans for purposes of determining the Upfront Fee.
Accordingly, Section A, Chapter 4, Paragraph C.1.a.ii. Upfront Fee Calculation for Multiple 7(a)
Loans Within 90 Days (Page 61) is revised to read as follows:
Except for scenarios involving WCP and EWCP loans, when two or more 7(a) loans (with
maturities exceeding 12 months) are approved for an applicant, including its affiliates, within 90
days of each other, the loans are considered as one loan for the purpose of determining the
percentage of guaranty and the Upfront Fee calculation. This rule applies regardless of whether
the loans were approved by the same or different Lenders.
For WCP loans, and EWCP loans: When two or more 7(a) loans are approved for an Applicant
(including its affiliates), within 90 days of each other, and one or more of the 7(a) loans is a
WCP or EWCP loan, the loan amounts are combined as if they are one loan to determine the
percentage of guaranty and Upfront Fee relief for manufacturers. For purposes of calculating the
Upfront Fee in this scenario, WCP and EWCP loans are not combined with any other 7(a) loans
since their guaranty fees are based on the maturity.
2. Update to Collateral Requirements and Lien Recordation
SBA is revising the collateral and lien recordation policies to recognize the delay that may be
experienced by Lenders in some jurisdictions between when a Lender files a lien with the
appropriate office and when it is recorded by that office. SBA will allow Lenders to sell loans on
the secondary market once the Lender has filed the lien with the appropriate office, on the
condition that the Lender will be subject to a full or partial denial of liability on the loan should
the Lender ultimately fail to obtain a properly perfected and recorded required lien with the
required priority.
Accordingly, Section B, Chapter 5, Paragraph D.5 Collateral (Pages 321-322) is revised as
follows:
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“The Lender must obtain all required collateral and must meet all other required terms and
conditions as applicable before or at the time of disbursement. Required terms and conditions
include requirements identified in the credit memorandum, such as cash/equity injections,
standby agreements, appraisals or evaluations, etc.
Lenders must obtain a valid and enforceable security interest in any loan collateral with evidence
of proper lien priority and must retain in their loan file proof of the lien filings, and, when
received, proof of the recordation of the liens.
Lenders may sell loans on the secondary market after filing a required lien with the appropriate
office, but before receiving proof from the appropriate office that the required filing was
recorded, However, if the loan defaults, and there is a loss resulting from the Lender’s failure to
obtain a properly perfected and recorded required lien with the required priority, the Lender will
be subject to a full or partial denial of liability equal to the guaranteed share of the net loss.”
3. Business Valuation Requirements for Loans to Employee Stock Option Plan (ESOPs)
The following language is added to SOP 50 10 8 in Section A, Chapter 2, Paragraph B. on page
29, as the new subparagraph 11.
“11. Regardless of the requirements stated throughout this SOP for business valuations, an
independent business valuation is not required when the Lender is making a loan involving
ESOPs for the types of loans discussed in this Paragraph B. In lieu of an independent business
valuation, the Lender may use the valuation obtained by the ESOP that was made in accordance
with ERISA specifications.”
4. Update to Appendix 13: 7(a) MANUFACTURERS' ACCESS TO REVOLVING CREDIT
(MARC)
SBA is clarifying in Appendix 13 (7(a) MANUFACTURERS ACCESS TO REVOLVING
CREDIT (MARC)) that a MARC loan may not be submitted under a PLP Lender's delegated
authority if it refinances a PLP Lender’s same institution debt (SID). Per 13 CFR
§120.452(a)(2), A Lender may not make a PLP business loan that reduces its existing credit
exposure for any Borrower.
Accordingly, SBA is revising Appendix 13, Paragraph 1.c., Ineligible Uses of Proceeds by
adding the following sentence to the end of the first paragraph:
“Refinancing of same institution debt may not be processed under a Lender’s PLP authority.”
Also, SBA is revising Appendix 13, Paragraph 1.h. Submission of Application for Guaranty, to
add a new sentence to the end of the introductory subparagraph, to change the language in the
first bullet, and to add a new bullet between the current first and second bullet as follows:
“Lenders with PLP delegated authority: Lenders with PLP delegated authority are required to
process 7(a) MARC loans using their PLP authority, except loans to refinance same institution
debt (SID), which may not be submitted under a Lender’s PLP authority and must be submitted
under non-delegated processing. Lenders with PLP delegated authority:
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• Must process all loan applications (except for loans used to refinance SID) using their
delegated authority.
• May only submit applications to SBA via E-Tran for approval under non-delegated
procedures when the loan will refinance the Lender’s same institution debt.”
The subsequent bullets in this paragraph remain unchanged.
C. Updates to the 504 Loan Program
1. Updated Franchise Requirements for CDCs:
SBA is revising the procedures for CDCs when processing applications involving a franchise, to
clarify that, prior to closing, CDCs must obtain an executed franchise agreement and any other
document the franchisor requires the franchisee to sign.
Accordingly, Section A, Chapter 1, Paragraph G.5.f.iv.b)i)-ii) (Page 36), are revised as follows:
i) For all 504 loans, prior to closing, the CDC must obtain a copy of the executed franchise
agreement and any other document the franchisor requires the franchisee to sign. The CDC must
submit this documentation to their closing counsel, who will review and certify that the franchise
documents are executed properly and comply with the SBA procedures set forth in SOP 50 10 8
and the SBA Franchise Directory.
ii) CDC Closing Counsel will certify to the legal sufficiency of the franchise documents using
the revised Opinion of CDC Counsel when submitting the closing package to the local District
Counsel. SBA Form 2268 (504 Debenture Closing Checklist) has the requirement to include the
Opinion of CDC Counsel as a requirement (Appendix D to the 504 Authorization Boilerplate).
2. Update to Contingency Fund
SBA is increasing the construction contingency for 504 projects from 10% to 15% and is
clarifying that if residual contingency amounts that do not exceed 2% are refunded to the small
business it must be as working capital.
Accordingly, Section C, Chapter 1, Paragraph C.8 Contingency Fund (Page 337) is revised as
follows:
“May not exceed 15% of the Project construction costs:
a. If the residual contingency amount does not exceed 2% of the debenture just prior to
closing, it may be refunded to the small business as working capital at the time the
debenture is funded.
b. If the contingency residual is in excess of 2% of the debenture just prior to closing, the
funds may not be distributed to the small business as working capital, and the debenture
must be reduced by the unused amount.”
3. Do-it-Yourself Construction
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SBA is revising the procedures for Do-it-Yourself Construction within the 504 program to better
match the procedures applicable to the 7(a) program.
Accordingly, Section C, Chapter 1, Paragraph C.9 “Do-it-yourself” Construction (Page 337) is
revised as follows:
9. “Do-it-yourself” Construction
“Do-it-yourself” construction, including renovations, and/or installation of machinery and
equipment, or situations where the Applicant acts as its own contractor have proven to be
generally unsatisfactory and can cause problems with lien waivers and mechanics liens,
causing potential losses to lenders and/or SBA.
“Do-it-yourself” construction, including renovations, (e.g., installation of carpeting or
painting) and/or installation of machinery and equipment may be permitted, if the CDC
can justify and document in the loan file that:
a. The Borrower/contractor is experienced in the type of construction and has all
appropriate licenses;
b. The cost is the same as, or less than, either:
i. What an unaffiliated contractor would charge as evidenced by two bids on
the work; or
ii. A single estimate provided by a third-party construction management firm,
or by the Third-Party Lender’s existing internal construction management
department if the Third Party Lender has an existing internal construction
management department that routinely manages construction for its
similarly-sized non-SBA guaranteed commercial loans.
c. The Borrower/contractor will not earn a profit on the construction.
4. Appraisal Requirements for Non-Arm’s Length Transactions and Change of Ownership
Projects
SBA is clarifying that appraisals must be submitted to the Sacramento Loan Processing Center
(SLPC) for both non-arm’s length transactions and change of ownership projects.
Accordingly, Section C, Chapter 1, Paragraph E.2.b.i.j)v) (Page 365) is revised as follows:
v) For both non-arm's length transactions and change of ownership projects, the
property must appraise for 100% of the estimated value. The purchase price is
limited to the lesser of the As-Is appraised value or the purchase price of 504
eligible fixed assets.
5. Clarification of CDC Authority for Disbursement Periods
SBA is clarifying the procedures for extending the disbursement period of a 504 Project and the
process to request an extension.
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Accordingly, Section C, Chapter 2, Paragraph A.2.a (Page 371) is revised as follows:
a. Disbursement Period: The loan must be disbursed within 48 months from the date of
approval, unless an exception to policy is approved and an extension is granted by
SBA through the OFPO/SLPC, with concurrency by SBA CFO to confirm funding
authority. For Debt Refinance without Expansion, the loan must be disbursed within 9
months from the date of approval. For Debt Refinance without Expansion, SBA may
grant an extension not to exceed 15 months. When appropriate, SLPC will also refer
extension requests to OFA for concurrency with OGC and the CFO.
SBA will track the approved time frame for loans and automatically cancel
undisbursed dollars. The Denver Finance Center (DFC) will make a reasonable effort
to mail an initial message to the CDC approximately 3 months prior to taking action
on undisbursed funds. The message will inform the CDC of the undisbursed dollar
amount and will provide a date on which the dollars will be automatically cancelled.
After the 3-month message has expired, DFC will make a reasonable effort to mail a
second message on the day the automatic cancellation is processed.
To request an extension of the disbursement period, a CDC must submit the request
through the SLPC as a 327 action and must include the following:
i. The reason for the extension, with a detailed timeline for project completion
and funding.
ii. A determination of no adverse change.
iii. Updated financial statements dated within 120 days of the request and
analysis thereof.
iv. Documentation to demonstrate how the project sources and uses have been
adjusted for any increases in project costs.
For loans processed under a CDC’s PCLP authority, items listed under Section C, Ch.
1, Para. F.2.a.i.-iv. must be submitted directly through E-Tran with notification to the
SLPC for review and consideration.
6. PCLP Extension Limits
SBA is clarifying the timeframe in which PCLP CDCs may modify the E-Tran Terms and
Conditions in order to remain consistent with the guidance in Section C, Chapter 2, Paragraph
A.2.a.
Accordingly, Section C, Chapter 2, Paragraph B.4.a (Page 375) is revised as follows:
“a. Generally, PCLP CDCs may modify and extend the E-Tran Terms and Conditions up
to 48 months from the date of approval using their unilateral authority. PCLP CDCs
must upload the final modified executed terms and conditions to E-Tran within 15
business days after debenture funding.”
7. Adjusting 504 Debt Refinance Balance
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SBA is expanding Section C, Chapter 2 Paragraph C.5, a.i” (e) on page 382 as follows:
“e) No funds should be paid directly to the Borrower unless the CDC obtains evidence of the
Borrower’s payments (cancelled checks and paid invoices). For 504 debt refinance
balances the principal balance of loan(s) approved for the debt refinance may decrease
between the original approved amount and the actual balance due at 504 loan closing and
funding because of intervening payments made by the Borrower. SBA requires that the
CDC document its file to account for the changes to the principal balance of the
refinanced debt that arise after loan approval, and provide this information to District
Counsel with the closing package. OCRM will include this as part of a CDCs review.
Submission of 327 loan modification requests to SLPC are not required to reduce the
originally approved debt refinance amount (with or without expansion) when:
(i) Account for the principal reductions from payments made by the borrower on the
debt being refinanced during the period between submission and disbursement;
(ii) The principal amount of these debt payments may be reimbursed to the borrower from
the proceeds of SBA-approved interim financing, or from the SBA debenture if no
interim financing is used.
Submission of 327 loan modification requests to SLPC are required when the approved project
costs are reallocated, unless it is an ALP Express Loan, in which case de minimis reallocations
are allowed as stated under Section C, Chapter 2, Paragraph B.3.e (page 375).
Questions
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local
SBA Field Office.
Thomas Kimsey
Associate Administrator
Office of Capital Access
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