SBA Updates it's Operating Procedures!

As we all know, the Small Business Administration (SBA) updates and modifies their Standard Operating Procedures (SOP) almost every year.  What you may not know is what some of the most recent changes were.  Included are:


·         Those of us that have been in the SBA world for a while remember that SBA required a 25% minimum down payment for business acquisitions, when the Goodwill was in excess of $500,000.  The new rules have reduced the required equity to be 10%, with at least 5% of this coming from borrower funds.  No more than 5% of any seller debt will be counted toward this amount and, it will only count if the seller note requires no payments for the full term of the loan

·         The SBA requires that anyone owning 20% or more of the business or real estate provide a personal guaranty.  While this is still the case, now, there is also a requirement that lenders review the financial condition of any 10% or greater owner, to determine if they would have been able to provide “Credit Elsewhere”.  It appears most lenders are requiring a review of the personal financial statements of 10%+ owners to comply with this new requirement

·         The SBA has established the ‘SBA Franchise Directory’, which is available on its website ( and serves as the sole source of a list of eligible franchises.  If a franchise is not listed on the directory, it is not eligible until the franchisor has submitted to the SBA for approval (something that I am told is taking about three weeks, right now).  The list also includes whether the franchise uses the SBA’s Franchise Addendum (Form 2462) or has negotiated their own version

·         A clarification that a borrower that leases space to any business engaged in any activity that is illegal under federal, state or local law is ineligible for SBA financing.  This appears to be in response to recent state approvals for marijuana-related businesses

·         Start-up businesses must contribute at least 10% of the total project costs

·         If a change of ownership occurs between partners, the pro-forma equity must represent at least 10% of the total assets.  If not, then the buyer must contribute additional equity to comply with the 10% equity requirement

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