Major SBA Changes for Business Acquisitions and Partner Buyouts

SBA Rule Updates: What Sellers Need to Know

As of June 1, 2025, the SBA has announced major changes to the SOP. These changes were made effective immediately and are important to understand to ensure your SBA transactions are eligible. As a borrower, it is very important to understand how these changes impact your transaction. These changes were introduced to align SBA transactions with what the SBA is meant to do. The SBA's purpose is to help individuals obtain loans in order to buy and operate a business. In addition, these changes were made to protect borrowers and banks from risky transactions. Therefore, reducing the amount of defaults.  

These are the most important changes to understand.

• First, every borrower, including minority investors and everyone benefiting from an SBA loan, must be a U.S. citizen or a Lawful Permanent Resident (green card holder). In other words, only U.S. citizens, nationals, naturalized citizens, and lawful permanent residents are able to qualify for an SBA loan.

• Second, the SBA has now changed the definition of “small loan”. The amount has been reduced from $500,000 to $350,000. Additionally, the minimum acceptable SBSS score has been raised from 155 to 165.

• Third, the Franchise directory is back. This will require franchisors to register their franchises in an SBA directory to make them eligible for SBA financing. Moving forward, banks must check the Franchise directory and ensure the franchise is registered; otherwise, the loan will not be eligible for SBA financing.

• Fourth, for partial business acquisitions, starting in June, businesses may use third-party verification methods, such as CPA-prepared financial statements or sales tax records. This can be used to show revenue and cash flow instead of tax returns.

• Fifth, for partial changes of ownership, both the operating company and the acquiring individuals must be the co-borrowers. Sellers retaining less than 20% ownership must personally guarantee the loan for at least two years. Any existing owner in a partial change of ownership who will retain any equity must be a co-borrower on the new loan, regardless of what percentage they retain. In addition, multi-step partial changes of ownership are no longer allowed. All new business acquisitions in which the seller retains any equity must be structured as a stock purchase.

• Sixth, a 10% injection is required in all business acquisition transactions. Part of the injection may come from seller financing, as long as the seller note is on a ten-year full standby. In addition, the seller's note may not exceed 50% of the required equity. In other words, the buyer will have to inject a minimum of 5% regardless of the seller's note.

In conclusion, the new SBA guidelines will benefit banks and borrowers by providing greater clarity on deal structures and stronger integrity for both parties. In the long term, these changes are intended to create a more sustainable SBA program and fewer risky loans that are likely to default.

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 Contributor Note

This blog was contributed by Samuel Criales, SBA lending expert with First Internet Bank, a nationwide Preferred SBA Lender supporting entrepreneurs and business owners across the U.S.

About Samuel Criales

Samuel Criales brings more than 14 years of banking experience — including the last six specializing in SBA lending for business acquisitions. From his home base in Texas, Sam serves clients nationwide as part of First Internet Bank’s top-ranked SBA team. Over his career, he has closed and funded more than $200 million in SBA loans, helping entrepreneurs and business owners successfully acquire and grow their companies. Sam holds a Bachelor’s degree in Economics from the University of California, San Diego, and a Master’s in Business from the University of Redlands.

About First Internet Bank

At First Internet Bank, entrepreneurship isn’t just something we finance — it’s part of our DNA. Founded 25 years ago at a kitchen table, the bank has grown into one of the nation’s top SBA 7(a) lenders by volume and amount financed. As a Preferred SBA Lender, First Internet Bank delivers a faster, more flexible lending experience tailored to each client’s goals. The SBA team helps business owners create custom financial solutions that preserve capital, lower payments, and provide the flexibility needed to grow or transition with confidence.  Learn more at FIRSTIB.COM.

About NorthStar Mergers & Acquisitions

At NorthStar Mergers & Acquisitions, we partner with trusted SBA lenders like Samuel Criales and First Internet Bank to help business owners successfully navigate their transitions. Our mission is simple — to make it easy for buyers to buy and sellers to achieve their dream exit with clarity, confidence, and maximum value.