In the world of small business finance, change is constant—but few changes hit harder than those made to SBA lending. With new rules under SOP 50.10.8, which took effect on June 1, 2025, the SBA has revamped its approach to risk, eligibility, and lender accountability, likely adding a headwind to small business M&A activity.
Below we have summarized our views of the most impactful changes.
One of the most consequential updates is the change in ownership eligibility: businesses must now be 100% owned by U.S. citizens or green card holders (the latter with at least six months of residency). Previously, 51% was sufficient.
This new rule disqualifies many businesses that have relied on diverse ownership structures, especially those with foreign investors or founders waiting on residency status. Prospective buyers with international ties must reassess ownership structures immediately or consider alternative (and likely more expensive) capital sources.
For years, equity rollovers allowed sellers to retain a minority stake post-transaction—a tool that helped transition ownership, maintain institutional knowledge, and keep necessary licensure active. That’s now increasingly difficult to maintain.
Under the new SOP, any retained equity—no matter how small—requires the seller to personally guarantee the full loan for at least two years. This is not commercially viable in most cases and, in effect, ends rollover equity as a structuring tool. Further, asset purchase options have been eliminated in favor of riskier stock purchases.
In addition, seller-financed standby requirements have shifted from two years to the full term of the loan (typically 10 years), removing a key method buyers used to meet equity thresholds.
As a result, buyers will need to bring more capital to the table, which may reduce access for new entrants—especially first-time business acquirers like those coming from search funds or corporate careers.
Lenders and borrowers alike now face a higher bar for creditworthiness and documentation:
These changes emphasize the need for stronger financial transparency, both at the borrower and lender level.
Some see these changes as a policy reset; others view them as politically driven. Either way, the market is adjusting, and the impact on small business transactions will be real: fewer deals, more extended closings, and an increased need for capital and compliance readiness.
Yet, with disruption comes opportunity. Lenders that adapt quickly, borrowers with strong fundamentals, and advisors who can guide clients through this maze will emerge stronger.