SBA Loan Program Updates: What You Need to Know About SOP 50 10 8 Revisions (2025)

The U.S. Small Business Administration (SBA) has released an important Procedural Notice (5000-872764), updating its Standard Operating Procedure (SOP) 50 10 8. These changes affect both the 7(a) Loan Program and the 504 Loan Program — two of the SBA’s most widely used financing tools for small businesses.

If you’re a business owner, lender, or advisor, here’s a breakdown of the updates — in plain English.

Why This Matters

The SBA updates its rules to reflect real-world lending practices, reduce confusion, and improve access to capital for small businesses. These new changes clarify definitions, update collateral rules, adjust franchise and construction requirements, and streamline certain lender obligations.

Understanding these changes helps borrowers prepare stronger loan applications — and ensures lenders remain compliant.

Key Changes to Both 7(a) and 504 Programs

1. New Definition of a "New Business"

Previously, SBA’s definition of a “new business” was tied to geography. Now it’s simpler:

• A new business is any business in operation 2 years or less.
• A business older than 2 years may still be treated as “new” if ownership changes hands, bringing in new, unproven management and additional debt.
• If an existing business acquires another business in the same NAICS code (with the same ownership), it is treated as an expansion, not a new business.

Takeaway: This makes it clearer when a borrower must contribute extra equity for riskier "new business" ventures.

Key Updates to the 7(a) Loan Program

1. Upfront Fee Clarification (90-Day Rule)

• If a borrower gets multiple 7(a) loans within 90 days, those loans are normally combined to calculate the upfront guaranty fee.
• New rule: Working Capital Pilot (WCP) loans and Export Working Capital Program (EWCP) loans are excluded from this combination.

Takeaway: This prevents unfairly higher fees when small working capital loans are bundled with larger financing.

2. Collateral & Lien Recordation

• Lenders often face delays in lien recordation by county offices.
• SBA will now allow loans to be sold on the secondary market as soon as liens are filed (even before they’re recorded).
• However: if a lien ultimately isn’t perfected, the lender risks losing SBA’s guaranty protection.

Takeaway: This speeds up loan sales but keeps accountability on lenders.

3. ESOP Loans and Business Valuations

• For loans involving Employee Stock Ownership Plans (ESOPs), lenders no longer need an independent SBA business valuation.
• Instead, they can use the valuation required under ERISA rules.

Takeaway: This reduces costs and red tape for employee-ownership transitions.

4. Manufacturers’ Access to Revolving Credit (MARC)

• MARC loans cannot refinance a lender’s same-institution debt under delegated PLP (Preferred Lender Program) authority.
• These must go through non-delegated SBA approval.

Takeaway: Prevents lenders from using SBA loans to bail out their own prior loans.

Key Updates to the 504 Loan Program

1. Franchise Documentation

• Before closing, Certified Development Companies (CDCs) must now collect executed franchise agreements and submit them to closing counsel for legal review.

Takeaway: Ensures compliance and prevents franchise disputes post-funding.

2. Construction Contingency

• The contingency fund for 504 projects increases from 10% to 15% of construction costs.
• Small unused amounts (up to 2%) can be refunded to the borrower as working capital.

Takeaway: Provides more financial cushion for rising construction costs.

3. Do-It-Yourself Construction

• SBA discourages "DIY" construction, but now allows it if:
  • The borrower is licensed and experienced.
  • Costs are proven equal to or less than outside bids.
  • The borrower does not profit from the work.

Takeaway: Small projects like painting or installing carpet may qualify, but major DIY builds remain risky.

4. Appraisals for Ownership Changes

• For non-arm’s length transactions (like buying from a relative) or ownership changes, appraisals must go to the Sacramento Loan Processing Center (SLPC).

Takeaway: Standardizes appraisals to ensure fair valuations.

5. Disbursement Timelines

• 504 loans must be disbursed within 48 months (4 years).
• Debt refinance without expansion must close within 9 months (extensions possible up to 15 months).

Takeaway: Keeps projects moving and prevents indefinite loan commitments.

6. Debt Refinance Adjustments

• Borrowers making payments on debt scheduled for refinance must have these reductions properly documented.
• Small balance changes no longer require a formal modification request, but significant reallocations do.

Takeaway: Reduces paperwork for lenders and borrowers while ensuring accuracy.

What Borrowers & Lenders Should Do Next

• Borrowers: Understand how these rules affect equity requirements, fees, and eligibility. If you’re pursuing a franchise, construction project, or ESOP, these changes directly impact you.
• Lenders/CDCs: Update loan checklists, underwriting procedures, and secondary market practices to align with the new SOP revisions.
• Advisors: Help clients prepare for these changes — especially around DIY construction, appraisals, and franchise compliance.

Final Thoughts

The SBA’s revisions to SOP 50 10 8 are designed to reduce confusion, speed up processing, and protect the integrity of SBA loan programs. While the updates are technical, the bottom line is this: small businesses now have clearer rules and more flexibility in some areas, while lenders must stay diligent in documentation and compliance.

For more details, you can read the full SBA Procedural Notice here .

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