SBA SOP 50 10 8: A Comprehensive Guide to the Latest SBA Loan Program Rules
- Evan Howard
- Apr 24
- 7 min read
Navigating the world of small business financing can be daunting, especially when it comes to understanding the rules and requirements set by the U.S. Small Business Administration (SBA). The SBA’s Standard Operating Procedures (SOPs) are the backbone of its loan programs, and the release of SOP 50 10 8 marks a significant update for lenders, borrowers, and professionals working with SBA-backed loans. With SOP 50 10 8, what these changes mean for the small business lending landscape?
What Is SBA SOP 50 10 8?
SOP 50 10 8 is the latest version of the SBA’s Standard Operating Procedure that governs the origination policies and procedures for the agency’s two flagship loan programs: the 7(a) Loan Program and the 504 Loan Program. Issued by the SBA’s Office of Capital Access, SOP 50 10 8 becomes effective June 1, 2025, and replaces previous versions, including SOP 50 10 7.1.
The SOP is designed to provide clarity and consistency for lenders and Certified Development Companies (CDCs) participating in SBA loan programs. It outlines eligibility requirements, underwriting standards, loan terms, and the documentation process for SBA-guaranteed loans, ensuring that both lenders and borrowers follow the same set of rules.
Structure of SOP 50 10 8
SOP 50 10 8 is organized into three main sections, each focusing on a different aspect of SBA lending:
Section A: Core Requirements for all 7(a) and 504 loans
Section B: 7(a) Loan Program requirements
Section C: 504 Loan Program requirements
This structure makes it easier for lenders and borrowers to find the specific information relevant to their loan type, whether they are seeking a traditional 7(a) loan, a 504 loan for fixed assets, or specialized programs like Community Advantage.
Key Changes and Highlights in SOP 50 10 8
SOP 50 10 8 introduces several significant changes, many of which revert to pre-2021 SBA requirements. These changes are intended to restore consistency, improve risk management, and clarify eligibility for both lenders and borrowers.
1. Restoration of Pre-2021 Underwriting and Eligibility Criteria
The SBA is largely reinstating requirements that were in place before January 2021. This includes:
Restoring 7(a) underwriting criteria
Reaffirming that SBA lenders are responsible for determining applicant eligibility
Eliminating the “do what you do” philosophy, which previously allowed lenders more discretion in underwriting
2. Franchise Directory Reinstated
SOP 50 10 8 brings back the SBA Franchise Directory, streamlining procedures for franchise eligibility and ensuring that only approved franchises can access SBA-backed loans.
3. Changes to Delegated Authority (PLP)
Lenders with Preferred Lender Program (PLP) authority must process all loans under their delegated authority, with specific exceptions for refinancing same-institution debt and certain International Trade loans where the SBA lien will not be in first position.
4. Reduced Maximum Loan Size for 7(a) Small Loans
The maximum loan size for 7(a) small loans is reduced from $500,000 to $350,000, tightening access to larger loan amounts under the small loan category. Additionally, the minimum acceptable Small Business Scoring Service (SBSS) score for 7(a) small loans increases from 155 to 165, raising the bar for creditworthiness.
5. Minimum Cash Injection for Startups
A 10% minimum cash injection is now required for loans to startup businesses. This change is aimed at ensuring that new business owners have “skin in the game” and are financially invested in the success of their venture.
Keep in mind, this is for a startup business (business in operations for 1 year or less). Existing businesses also have the ability to not provide an equity injection utilizing an expansion loan. Additionally, it seems a startup business may also be allowed to avoid the equity injection requirement through a full standby loan by the Seller.
6. Restrictions on Debt Refinancing
Merchant cash advance (MCA) and factoring arrangements are now ineligible for debt refinancing with SBA loans. This change is intended to reduce risk and prevent the use of SBA funds to pay off high-cost, high-risk debt products.
7. Ownership Change Transactions
Multi-step partial change of ownership transactions are disallowed, simplifying and clarifying the rules around business acquisitions and ownership changes.
8. Clarification on Management Agreements and Leased Space
SOP 50 10 8 clarifies the criteria for evaluating the eligibility of businesses operating under management agreements and those that lease space (such as shopping centers, office suites, salon suites, ghost kitchens, and similar models).
9. Eligibility of Applicants with Delinquent SBA Loans
Applicants with an existing delinquent SBA loan are not eligible for additional SBA financing, reinforcing responsible borrowing and risk management.
10. Non-Citizen Ownership Rules
The SOP further clarifies guidelines regarding businesses owned by non-citizens. While businesses owned by properly documented Legal Permanent Residents (LPRs) are eligible, other non-citizen ownership scenarios are more tightly defined.
Main Points Established by SOP 50 10 8
To understand the impact of SOP 50 10 8, it’s helpful to break down its main points by section.
Section A: Core Requirements for All 7(a) and 504 Loans
Applicant Eligibility: The applicant must be an operating business, organized for profit, located in the United States, and meet SBA size standards based on industry or alternative size standards.
Ineligible Businesses: Certain business types are ineligible, including those with discriminatory practices, government-owned entities (with some exceptions), and businesses involved in prurient activities or with associates facing serious legal issues.
Affiliation Rules: The SOP details how business ownership and affiliations are determined for eligibility, especially when multiple businesses are involved or when ownership is split among individuals and entities.
Credit Not Available Elsewhere: Applicants must demonstrate that credit is not available elsewhere on reasonable terms, a core principle of SBA lending.
Section B: 7(a) Loan Program Requirements
Loan Types and Uses: Outlines eligible uses of proceeds, loan terms, and conditions for various 7(a) loan types, including Standard 7(a), SBA Express, and CAPLines.
Underwriting Standards: Details the underwriting criteria, including the new minimum SBSS score and cash injection requirements for startups.
Application Process: Provides step-by-step guidance for submitting applications for SBA guarantees.
Section C: 504 Loan Program Requirements
Fixed Asset Financing: Focuses on loans for purchasing fixed assets like real estate and equipment, with specific eligibility and documentation requirements.
Change of Ownership: Clarifies how size standards and eligibility are determined when loans are used for business acquisitions.
Why SOP 50 10 8 Matters for Lenders and Borrowers
The SBA’s SOPs are not just bureaucratic documents—they set the rules of the road for billions in small business lending each year. SOP 50 10 8 is particularly significant because:
It clarifies and simplifies eligibility and underwriting standards, making it easier for lenders to process loans efficiently and for borrowers to understand what is required.
By restoring pre-2021 requirements, it aims to reduce risk and ensure the integrity of the SBA loan program.
The changes to loan size, cash injection, and ineligible uses of proceeds are designed to ensure that SBA-backed loans go to businesses that need them most and are well-positioned for success.
Practical Implications and Best Practices
For Lenders:
Review all delegated authority procedures and ensure compliance with new limitations, especially for refinancing and International Trade loans.
Update underwriting processes to reflect the new SBSS score minimums and cash injection requirements.
Carefully document eligibility determinations, especially for businesses with complex ownership structures or management agreements.
Use the reinstated Franchise Directory for franchise loan applications.
For Borrowers:
Prepare to demonstrate eligibility by providing detailed documentation of business structure, ownership, and financial need.
Be ready to meet higher credit score thresholds and provide a minimum cash injection for startup loans.
Understand that refinancing high-risk debt products like MCAs and factoring is no longer allowed under SBA programs.
If you have a delinquent SBA loan, resolve it before seeking new SBA financing.
Frequently Asked Questions about SBA SOP 50 10 8
Q: When does SOP 50 10 8 take effect?A: SOP 50 10 8 is effective June 1, 2025.
Q: Which loan programs does SOP 50 10 8 cover?A: It covers the SBA 7(a) and 504 loan programs, including Community Advantage and related programs.
Q: What is the new maximum loan size for 7(a) small loans?A: The maximum loan size is reduced from $500,000 to $350,000.
Q: What is the minimum SBSS score for 7(a) small loans?A: The minimum acceptable SBSS score increases from 155 to 165.
Q: Are there new requirements for startups?A: Yes, a 10% minimum cash injection is required for loans to startups.
Q: Can SBA loans be used to refinance merchant cash advances or factoring?A: No, these arrangements are now ineligible for refinancing with SBA loans.
Conclusion
SOP 50 10 8 represents a major update to the SBA’s loan program rules, restoring many pre-2021 requirements and introducing new standards to improve risk management and program integrity. For lenders, it means updating procedures and underwriting practices. For borrowers, it means being prepared for stricter eligibility and documentation requirements.
Whether you’re a lender, borrower, or advisor, understanding the nuances of SOP 50 10 8 is essential for success in the SBA loan process. By staying informed and adapting to these changes, you can ensure compliance, speed up approvals, and maximize the benefits of SBA-backed financing.
Stay tuned for more updates as the SBA continues to refine its loan programs to meet the evolving needs of America’s small businesses.
Howard Law is a business and M&A law firm in the greater Charlotte, North Carolina area, with additional services in M&A advisory and business brokerage. Howard Law is a law firm based in the greater Charlotte, North Carolina area focused on business law, corporate law, mergers & acquisitions, M&A advisor and business brokerage. Handling all business matters from incorporation to acquisition as well as a comprehensive understanding in assisting through mergers and acquisition. The choice of a lawyer is an important decision and should not be based solely on advertisements. The information on this website is for general and informational purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. Information on this website is not legal advice and does not create an attorney-client relationship. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.
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