How Recent SBA Reforms Affect Business Buyers and Sellers
The Small Business Administration (SBA) has made significant changes to its loan programs that will affect business owners seeking financing in 2025. These changes come in the wake of Executive Order 14159 issued on March 7, 2025, and represent some of the most substantial policy shifts in recent SBA history. The new rules impact eligibility requirements, documentation processes, fees, and more.
Small business owners, especially those in industries like gas stations, liquor stores, and restaurants, need to understand how these changes affect their ability to access SBA financing. Whether you’re looking to purchase an existing business, expand your current operations, or refinance business debt, these policy updates will directly impact your loan application process and approval chances.
The timing of these changes coincides with an already challenging economic environment. With rising interest rates, inflation concerns, and potential recession fears, accessing affordable financing has become increasingly important for small business survival and growth. The SBA has traditionally been a crucial source of capital during economic downturns, but these new requirements may limit eligibility for some business owners.
For potential sellers, these changes could also affect the marketability of businesses, as the pool of qualified buyers able to secure SBA financing has narrowed. Understanding these new requirements is essential for making informed decisions about buying, selling, or expanding a business in the current climate.
If you’re planning to apply for an SBA loan this year, here’s what you need to understand about these new requirements.
New Citizenship Requirements
As of March 7, 2025, businesses must be 100% owned by U.S. citizens, U.S. nationals, or Lawful Permanent Residents (LPRs) to qualify for SBA loans. Starfieldsmith This is a major shift from the previous policy that allowed businesses with up to 49% foreign ownership to qualify.
Even a 1% ownership stake by a foreign national now makes a business completely ineligible for SBA financing. Exitstrategiesgroup This affects many businesses with international investors or partners.
What this means for you: Check your business ownership structure immediately. If any of your investors or partners are not U.S. citizens or green card holders, you’ll need to restructure your ownership before applying for an SBA loan.
Return of Guarantee Fees
Guaranty fees have reverted to the maximum levels authorized by the Small Business Act. After several years of waivers, the SBA has reinstated its upfront guarantee fees for 7(a) loans. These fees vary based on loan size. CDC Small Business
What this means for you: Budget for these additional costs when planning your financing. The fees are typically a percentage of the guaranteed portion of the loan.
Franchise Directory Reinstated
The SBA Franchise Directory has been reinstated, and franchisors must be listed in the directory to be eligible for SBA financing. This means if you’re looking to purchase a franchise, you’ll need to verify it’s on the approved list before applying.
Life Insurance Requirements
In most cases, if the loan is not fully secured, life insurance is required in the amount of the collateral shortfall. This protects the lender if something happens to the business owner.
Equity Injection Rules
The minimum 10% equity injection for any loan of any size to a start-up business and for complete changes of ownership has been reinstated. There have also been revisions to what counts as equity injection.
Specifically, seller debt may not be considered as part of the equity injection unless:
- It is on full standby for the life of the SBA loan
- It does not exceed half of the SBA-required equity injection
What this means for you: If you’re buying a business or starting a new one, be prepared to contribute at least 10% of the project cost from your own funds or eligible sources.
Documentation Requirements
The SBA now requires lenders to list at least 81% of beneficial owners in the E-Tran system when submitting a loan application. CDC Small Business A beneficial owner includes anyone with direct or indirect ownership in your business.
Business owners must certify that none of the listed owners are ineligible persons. Coleman Report Lenders must verify this information before submitting applications to the SBA.
Environmental Review Changes
The SBA has updated how they review environmental reports for properties. If no contamination is found, lenders must certify this and keep the environmental investigation report in the loan file. CDC Small Business
For properties with contamination issues, additional steps are required if the lender still wishes to make the loan.
We’re Here to Help You Navigate New SBA Eligibility Requirements
We know these changes can be confusing and overwhelming. With so many updates to the SBA program, it might feel impossible to keep up. Have no fear! Our experienced team at Mission Peak Brokers is keeping track of ALL the changes (big and small) and we are ready to assist should you need more information about any of these or future changes.
This is not a comprehensive list of all SBA changes. Contact us for details specific to your situation and guidance on how to navigate the SBA loan process successfully in 2025.
Despite these changes, SBA loans remain an excellent option for many small business owners seeking to purchase gas stations, liquor stores, restaurants, and commercial real estate. Let our expertise work for you.
