How New SBA Loan Changes Could Impact Buying and Selling Small Businesses

In this post, we’ll break down what has changed, how these changes could potentially impact your ability to buy or sell a business, and what you can do to adapt.

What exactly changed with the SBA 7(a) Loan Program?

The SBA’s 7(a) loan is the most commonly used small business loan program, designed to guarantee loans made by private lenders to small businesses. It offers loan amounts up to $5 million with longer repayment terms and lower interest rates compared to traditional loans.

Recent changes include:

1. Restoration of lender fees
   Under the previous administration, lender fees were waived to encourage lending. However, this caused a sharp increase in loan defaults and financial losses for the program, threatening its sustainability. As of 2025, the SBA has reinstated these fees to restore the financial health of the program. Learn more from SBA’s official announcement here.
   

2. Reinstatement of robust underwriting standards
   The prior "Do What You Do" approach significantly lowered loan approval criteria, letting through higher-risk borrowers. The SBA is now reverting to stricter underwriting standards from before 2021 to reduce defaults and protect taxpayer funds. This means loans will be harder to qualify for, requiring stronger credit and financial history from borrowers. Details here.

3. Stricter documentation and eligibility rules
   The SBA is tightening eligibility verification, including use of the Franchise Directory and enhanced financial documentation, which means more paperwork and a longer approval process.
   

What this means for buyers

• Higher down payments and tighter qualification
  
  • ‍Buyers will likely need to have stronger credit, better business plans, and more upfront cash due to restored underwriting standards.
  • This may mean it takes longer to get approved for a loan or you may need to explore alternative financing options.
    

• Longer approval times
  More documentation and scrutiny mean your loan may take longer to close, which can delay your business purchase timeline.
  
  

What this means for sellers

• Increased use of seller financing
  Since SBA loans are harder to get, more buyers might turn to seller financing, where the seller acts as the lender. Sellers should understand the risks and ensure they document terms carefully.
  
  
• Longer sale timelines
  The added SBA loan approval steps can slow the sale process, requiring more patience and clear communication with buyers.
  
  

How buyers and sellers can adapt

Buyers:

• Strengthen your credit score and prepare a detailed business plan.
• Save more for a larger down payment.
• Explore alternative financing options like private lenders or investor partnerships if SBA loan qualifications are too restrictive.
  
  

Sellers:

• Be ready to offer seller financing but fully understand the risks.
• Prepare for longer closing timelines due to SBA loan approval delays.
• Work with financial advisors or brokers to ensure all documentation is clear and compliant.
  
  

Other financing options to consider

• Alternative lenders: Some non-bank lenders offer more flexible or faster loan options.
  
• Investor partnerships: Bring in investors who can help fund your purchase or business expansion.
  
  

Final thoughts

The SBA’s 7(a) loan program changes aim to protect taxpayers and ensure the program’s long-term viability, but they also make qualifying for loans more challenging. Both buyers and sellers need to prepare for these stricter rules by improving financial readiness, considering seller financing carefully, and exploring other funding options.

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