April 30, 2025

Bomb Goes Off on SBA | LoL #6

Shane Pierson, Stephanie Dunn & Brian Congelliere

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Bomb Goes Off on SBA — What the SOP 50 10 8 Changes Mean for Lenders and Borrowers

The SBA just rewrote the rulebook, and the small business lending world is scrambling to figure out what it means. In Episode 6 of Lords of Lending, Shane Pierson, Stephanie Dunn, and Brian Congelliere break down the major SBA policy changes in the newly released SOP 50 10 8 — the standard operating procedure that governs how every SBA 7(a) loan in the country gets processed. These are not minor tweaks. They are structural shifts that will change how deals get structured, which sellers can exit cleanly, and whether certain borrowers can access capital at all.

In this episode: Shane leads the trio through the biggest pain points in the new SOP: the reverted down payment and injection rules that kill the 2.5% buyer entry point, the seller carryback standby requirement that forces sellers to wait the entire life of the loan to collect, the full personal guarantee now required from every minority owner regardless of their stake, the elimination of GP submissions for PLP lenders, and the ban on refinancing MCA debt — a change that effectively removes the lifeline for 25% of small businesses in America that are still carrying post-COVID short-term debt. Steph connects the dots between these changes and the silver tsunami of baby boomer sellers who need to exit their businesses now. Brian frames the policy failure as a feedback loop problem — rules made in an ivory tower without input from the people on the front lines.

Key Takeaways

1. The Injection Rules Reverted — and Active Deals Are Caught in the Crossfire

Before SOP 50 10 8, a business buyer could enter an acquisition with as little as 2.5% from their own pocket. The seller could carry up to 75% of the 10% injection requirement on a two-year standby note, and in some cases, a buyer could achieve 100% financing if the seller was willing to carry the full 10% on standby.

That is over. The new SOP reverts the injection rules back to what existed two SOPs ago — essentially the rules from eight years prior. Now, a change of ownership requires a full 10% injection, split 5% buyer and 5% seller at most. And the seller's portion must be on standby for the life of the loan — not two years, but the full 10 or 25 year term.

Steph acknowledged that requiring some buyer skin in the game is reasonable. If a buyer does not have 5% to put down, there is a legitimate question about whether they are ready to own a business. But the life-of-loan standby requirement on the seller carry is where the rule falls apart in practice.

"A 70-year-old doesn't want to hold paper for 25 years. Do the math, guys. When you're talking about a real estate transaction and you have to hold paper for 25 years, that basically means the seller's never getting that 5%. You are selling 95% of your business." — Stephanie Dunn, Lords of Lending Episode #6

Brian identified the cascading effect: sellers will simply raise their asking prices by 10% to compensate for the trapped capital. The rule will not reduce deal sizes or improve loan quality. It will just inflate purchase prices and create new friction in negotiations that were already complex.

"They're just gonna charge more for their business and then carry that note. And at the end of 10 years they maybe get paid, maybe they don't. It's just gonna force different things to happen that effectuate the same result." — Brian Congelliere, Lords of Lending Episode #6

For borrowers with deals currently in progress, the clock is ticking. If the SBA approval is not secured before the June 1st effective date, buyers and sellers will need to go back to the table and renegotiate the injection structure. Any deal built on the old 2.5% framework is at risk.

2. Minority Owners Now Carry Full Guarantees — Effectively Killing Partial Ownership Transfers

The second major change is the new guarantee requirement for partial acquisitions. Under the new SOP, any owner — regardless of their percentage stake — must provide a full personal guarantee on the entire loan. A 5% owner guarantees the same as a 95% owner.

This rule makes no practical sense when examined against standard full-transfer acquisitions, where minority partners are not required to guarantee. Shane pointed out the contradiction directly: on a full change of ownership, a 3% partner gets the benefit of the loan without a full guarantee. On a partial transfer, a 5% partner who is often the exiting seller must guarantee everything.

Steph read between the lines and identified the real intent. The SBA does not want partial ownership transfers. They do not want sellers sticking around. By requiring full guarantees from minority owners, they have made it financially irrational for a seller to retain even a small stake.

"They don't want partial ownership transfers. They don't want seller carries. Those are the big takeaways. All you do to eliminate those two things is say the seller has to fully guarantee and the seller has to hold paper for the life of the loan. Well, that eliminates that." — Stephanie Dunn, Lords of Lending Episode #6

The servicing implications are just as bad. Steph consulted with a 40-year SBA servicing veteran who said point-blank that these two changes alone — the seller guarantee and the life-of-loan standby — will create massive servicing backlogs at the SBA and at banks. Minority partners come and go on these transactions. Tracking and enforcing guarantees on rotating minority owners for 25 years is an operational nightmare, especially for an agency that just cut 40% of its staff.

3. The MCA Refinance Ban Buries the Businesses That Need Help Most

The change that drew the strongest reaction from all three hosts is the elimination of MCA and factoring debt refinancing through SBA loans. Merchant cash advance debt — notorious for rates that amount to usury by any other name — has become a survival tool for small businesses since COVID. Steph pulled a statistic that 25% of small businesses in America carry MCA debt as of 2025.

The SBA loan was the exit strategy. MCA lenders marketed their products on that basis: take this expensive short-term debt now, then refinance into an SBA loan with normal terms later. Whether that sales pitch was predatory is a separate conversation. The reality is that the SBA was the cure — and this rule just took the medicine off the shelf.

"25% of small businesses in America have MCA debt. That tells me 25% of small businesses in America are still on life support since COVID. They tried to find alternative solutions to financing and access capital, and now we just buried them." — Stephanie Dunn, Lords of Lending Episode #6

Shane acknowledged the SBA's likely reasoning. Some borrowers were gaming the system — taking MCA debt one week and applying for an SBA loan the next, using the refinance as an immediate arbitrage play. And some borrowers who got SBA refinancing went right back to MCA lenders and defaulted on everything. But he argued the solution is targeted, not wholesale: require the MCA debt to be seasoned for three to six months before it is eligible for refinance, rather than banning refinancing entirely.

Brian raised the practical counterpoint that fast-growing businesses sometimes take MCA debt deliberately. They have a million-dollar contract they cannot fund from cash flow, so they take expensive short-term capital to capture the revenue and plan to refinance later. For those operators, MCA is a calculated business decision, not a sign of distress.

"I just don't see how stopping that at this point really helps anything... it seems baffling to me why that would be frowned upon to such a degree to put it in this new SOP that we can't do it at all." — Brian Congelliere, Lords of Lending Episode #6

Steph followed the logic to its conclusion. If the SBA bans MCA refinancing, where does it stop? Credit card debt at 30% APR? Equipment financing at 20%? The precedent of excluding specific debt categories from refinancing opens a door the agency may not want to walk through. And if the real goal is to kill MCA lenders by removing their exit strategy, then the SBA should be building a better alternative — like an enhanced line of credit product — rather than just pulling the plug and watching small businesses drown.

"If the whole intention is to get rid of those predatory lenders, then the agency's intention is shutting down MCA lenders. 'Cause now there's no takeout... So why would we not then enhance our product, the line of credit product, as the alternative to small businesses?" — Stephanie Dunn, Lords of Lending Episode #6

What This Means for Borrowers, Sellers, and Lenders

The cumulative effect of SOP 50 10 8 is a contraction. Fewer deal structures will work. Fewer sellers will be willing to carry notes. Fewer minority partners will sign full guarantees. Fewer banks will approve fringe deals without the GP safety net. And 25% of small businesses carrying MCA debt just lost their best path to healthy long-term financing.

Brian framed the root cause as a feedback loop failure. In technology companies, product decisions are tested, measured, and iterated. In Congress, laws get litigated and refined through the courts. At the SBA, there is no mechanism for frontline lenders and borrowers to push back on rules that do not work in practice. A new administration comes in, polls some industry heads, makes decisions in a room, and publishes an SOP that the entire market must absorb — with no iteration cycle.

"With SBA, there's no feedback loop. There's no way for anyone to litigate out what these rules actually mean. New administration comes in. 'Hmm, we think we should make some changes.' They poll some people... and then they basically go in a room and come up with the decisions they wanna make." — Brian Congelliere, Lords of Lending Episode #6

Steph put the timing problem in blunt terms. The SOP effectively reverted to rules from eight years ago. But America is not the same country it was eight years ago. There was a global pandemic, a recession, historic inflation, staffing crises, and a political environment that whipsawed small businesses in every direction. Reverting to pre-pandemic rules in a post-pandemic economy is not conservative policy — it is willful blindness.

If there is one practical takeaway for borrowers, it is this: find a PLP lender. Preferred Lending Partners can approve loans in-house without sending them to the SBA center. With the SBA's staff cut by 40% and GP submissions eliminated for PLP lenders, the turn time for any deal that has to go through general processing is going to be brutal. Steph's advice was direct: do not mess with GP lenders right now. Find a PLP lender who knows the SOP inside and out and can make credit decisions without relying on the agency to do it for them.

The Complete Guide to SBA 7(a) Loans — Foundational knowledge for borrowers working with the updated SOP
SBA Lending in 2026: What to Expect — Market outlook in light of policy shifts and rate environment
5 Myths About SBA Loans Every Founder Should Know — Common misconceptions that trip up first-time borrowers

Frequently Asked Questions

What is SOP 50 10 8 and why does it matter?

SOP 50 10 8 is the SBA's updated Standard Operating Procedure for processing 7(a) loans. It governs everything from how much money a buyer must bring to the table, how seller notes can be structured, who has to personally guarantee the loan, and what types of debt can be refinanced. Every SBA lender in the country must follow these rules, so changes directly affect what deals get approved and how quickly they close.

How much down payment do I need to buy a business with an SBA loan now?

Under the new SOP, business acquisitions require a 10% injection. The buyer must contribute at least 5% from their own funds. The seller can carry the remaining 5%, but only if that seller note is placed on full standby — no payments, no interest — for the life of the SBA loan. That means on a 10-year term loan, the seller waits 10 years. On a 25-year loan with real estate, the seller waits 25 years.

Can I still refinance MCA debt with an SBA loan?

No. The new SOP eliminates the ability to refinance merchant cash advance (MCA) debt or factoring debt through an SBA loan. This affects an estimated 25% of small businesses in America that currently carry MCA obligations. The Lords of Lending team expects this rule may be modified or rolled back, but as of the current effective date, MCA refinancing through SBA is off the table.

What is the difference between a PLP lender and a GP lender?

A PLP (Preferred Lending Partner) lender has delegated authority from the SBA to approve loans in-house without sending them to the SBA center for review. A GP (General Processing) lender must submit deals to the SBA for approval, which adds weeks to the timeline. Under the new SOP, PLP lenders can no longer send deals to the center for GP processing, which means they must make all credit decisions internally. The Lords strongly recommend working with a PLP lender for faster processing and more experienced credit teams.

Will purchase prices go up because of the new injection rules?

The Lords believe so. Brian predicted that sellers will raise asking prices by approximately 10% to compensate for the capital trapped in life-of-loan standby notes. The rule does not reduce the cost of acquisitions — it reshuffles where the money comes from and who bears the risk of delayed repayment.

Want to Stay Ahead of SBA Policy Changes?

The Lords of Lending Training Platform breaks down SOP changes, deal structuring strategies, and real-world scenarios so you can adapt faster than the competition.

Explore training options at learn.lordsoflending.com/pricing

This content is for educational purposes only and does not constitute legal, financial, or investment advice. Consult with a qualified attorney, CPA, and financial advisor before making business or financing decisions. Loan terms, rates, and programs are subject to change and vary by lender.