Key Changes in SOP 50 10 8: What Business Buyers and Sellers Must Know

Key Changes in SOP 50 10 8: What Business Buyers and Sellers Must Know

Effective June 1, 2025, the SBA has implemented major revisions to its Standard Operating Procedure (SOP) 50 10 8, replacing SOP 50 10 7.1. These changes are highly relevant for small business buyers, sellers, and lenders relying on SBA 7(a) financing for ownership transitions. Here’s what you need to know:

1. Stricter Requirements on Change of Ownership

What Changed:
Buyers now face a debt-to-worth ratio cap of 9:1 before an ownership change. If unmet, buyers must inject equity—at least 10% of the purchase price—often in cash.

Notable Detail:
Standby debt can qualify as equity only if it’s fully standby for the loan term and properly documented via SBA Form 155.

Impact:
Expect increased capital requirements and limited options for highly leveraged buyers.

2. Expanded Equity Injection Standards

What Changed:
Equity sources now include:

• Non-borrowed cash
  
  

• Grant funding (with no clawbacks)
  
  

• Appraised non-cash assets
  
  

• Prepaid expenses (with documentation)
  
  

Impact:
These options allow more flexibility, but demand thorough documentation and lender diligence.

3. Restrictions on Loan Increases

What Changed:
Loan increases exceeding 20% or made more than 18 months after approval now require SBA approval for non-delegated lenders. Delegated lenders must document justification thoroughly.

Impact:
Limits adaptability for post-close funding adjustments and adds complexity to phased deals.

4. Transfer of SBA Guaranty Between Lenders

What Changed:
Transfers are now permitted before final disbursement—with SBA approval and justification. Bulk transfers are also addressed.

Impact:
Provides flexibility to change lenders mid-deal, improving transaction salvageability.

5. New Rules for E-Tran Disbursement

What Changed:
Loans must be disbursed within 48 months, or the undisbursed amount is canceled. Escrow use is capped at 5 business days.

Impact:
Tightens timelines for fund deployment and requires more precise transaction coordination.

6. Use of Interest Rate Swaps

What Changed:
Permitted if the swap doesn’t alter SBA’s repayment default metrics. Must include specific disclosures and borrower acknowledgment.

Impact:
Introduces a hedging tool for borrowers but adds legal and compliance considerations.

7. Tighter Standards for Partial Buyouts

What Changed:
Balance sheet tests now apply even to partial ownership buyouts. If ratios don’t pass, equity injection is required.

Impact:
Complicates transitions involving family members, partners, or internal successors.

Implications for Buyers and Sellers

For Buyers:

• More capital and documentation are needed up front
  
  

• Less post-close flexibility
  
  

• Emphasis on clear transaction structure and funding source validation
  
  

For Sellers:

• Financials will face more pre-sale scrutiny
  
  

• Longer prep periods for SBA-eligible deals
  
  

• Greater need to support buyer readiness
  

Conclusion
These changes increase the complexity of SBA-backed business transitions. Whether you're buying or selling, understanding these updates—and planning accordingly—is critical for deal success.

Need help navigating SOP 50 10 8? Contact Navvee Business Advisory and Law for tailored guidance and transaction support.