THIS JUST IN — SBA Issues End-of-Year Clean Up to SOP 50 10 8 for 7(a) and 504 Loan Programs
by Bob Coleman
Founder & Publisher
SBA has released Procedural Notice 5000-872764, effective September 30, 2025, announcing an end-of-year clean up to SOP 50 10 8 that impacts both the 7(a) and 504 loan programs. Below is a detailed breakdown of the changes lenders need to know.
Updates Affecting Both 7(a) and 504 Programs
New Business Definition
SBA has revised the definition of a New Business. Now, a business in operation for two years or less qualifies as new. Additionally, businesses older than two years may still be considered new if ownership changes result in unproven management and additional unrelated debt. The “same geographic area” requirement has been removed, focusing instead on NAICS code and identical ownership to distinguish expansions from new ventures. Co-borrowers in the same NAICS code are treated as expansions, not new businesses.
Key 7(a) Loan Program Changes
1. Upfront Fee Calculations
SBA clarified its 90-day loan rule. Working Capital Pilot (WCP) and Export Working Capital Program (EWCP) loans are excluded from being combined with other 7(a) loans for upfront fee calculations.
2. Collateral and Lien Recordation
Recognizing delays in lien recordings, the SBA will now allow lenders to sell loans on the secondary market once liens are filed—even before recordation. However, failure to perfect liens can result in partial or full denial of liability.
3. ESOP Loan Valuations
Independent valuations are no longer required for loans involving Employee Stock Ownership Plans (ESOPs). Instead, lenders may rely on valuations conducted under ERISA standards.
4. MARC Loan Refinancing
SBA clarified that Manufacturers’ Access to Revolving Credit (MARC) loans cannot refinance same-institution debt under PLP delegated authority. Such loans must go through non-delegated processing.
Key 504 Loan Program Changes
1. Franchise Requirements
CDCs must now obtain executed franchise agreements and related documents prior to closing, with legal sufficiency certified by counsel.
2. Construction Contingency Fund
The contingency allowance is raised from 10% to 15%. Residual amounts of up to 2% may be refunded as working capital; excesses beyond 2% must reduce the debenture.
3. Do-It-Yourself Construction
Borrower-led construction is discouraged but permitted if borrowers are licensed, experienced, and costs are validated against third-party estimates. Borrowers cannot profit from such projects.
4. Appraisal Requirements
For both non-arm’s length and change of ownership projects, appraisals must be submitted to the Sacramento Loan Processing Center and properties must appraise at 100% of estimated value.
5. Disbursement and Extensions
The disbursement window is set at 48 months for most 504 projects, with special timelines for debt refinance. CDCs can request extensions through SLPC with supporting documentation.
6. PCLP and Refinance Adjustments
PCLP CDCs may extend terms up to 48 months unilaterally. For 504 debt refinancing, CDCs must document principal balance changes due to borrower payments before closing.
Access the Notice here
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