Look, I’ve been in this game for 26 years, and I told you June 1st, 2025 was going to separate the real lenders from the pretenders. Well, it’s been over 10 weeks now, and guess what? I was right.
The lenders who listened and prepared? They’re crushing it. The ones who thought they could figure it out later? They’re drowning in compliance issues and losing deals left and right. The SBA dropped SOP 50 10 8 on us, and it wasn’t some minor tweak—it was a complete overhaul that’s already reshaping who wins and who loses in this market.
You want to know why they did this? Because the “do what you do” philosophy that everyone got comfortable with cost taxpayers $397 million and created the first negative cash flow in 13 years. The party’s over, folks. We’re back to real underwriting, and the market is already proving who was swimming naked when the tide went out.
I’ve been watching lenders struggle with this for 10 weeks now. The smart ones who adapted quickly are dominating deals. The ones who fought it or tried to find workarounds? Exactly what I expected—they’re getting crushed. Every single loan getting an SBA number since June 1st falls under these rules. No grandfathering. No exceptions. And if you’re still not ready, you’re already behind.
The “do what you do” era is dead—and the winners are already emerging
Here’s what I’ve been seeing since June 1st: the “do what you do” philosophy that was killing the program is finally gone, and the lenders who get it are pulling ahead fast.
The Credit Elsewhere Test came back with teeth, and I’m watching lenders fumble this daily. No more checking a box and moving on. You need detailed narratives proving your borrower can’t get financing elsewhere on reasonable terms. That means analyzing personal liquidity of every owner with 20% or more—including their spouses and kids. Miss this documentation? Kiss your SBA guaranty goodbye. I’ve already seen lenders lose guaranties over sloppy Credit Elsewhere documentation.
The 10% equity injection requirement returned for startups and ownership changes, and the creative financing games are over. Seller financing only counts if it’s on full standby for the entire loan term with zero payments, and it can only represent 50% of your equity injection. Plus, any seller keeping equity has to personally guarantee the full loan for two years. The lenders who adapted their deal structures quickly are closing deals while their competitors are still trying to explain to sellers why the old games don’t work anymore.
Small Loan thresholds dropped from $500K to $350K, and this is where I’m seeing the biggest separation. More loans need full underwriting instead of the streamlined approach. The minimum SBSS score jumped from 155 to 165. Translation? Deals that would have sailed through before are getting declined, and the lenders who didn’t adjust their pipeline expectations got caught flat-footed.
Here’s the reality check: if you were coasting on loose underwriting, the last 10 weeks have been your wake-up call. The SBA isn’t playing games anymore, and the market is rewarding lenders who took this seriously from day one.
Franchise directory is back—and the scramble is real
The SBA Franchise Directory is back, and I’m already seeing the winners and losers emerge. The chaos of case-by-case franchise analysis is over, and we have structure again.
Here’s what’s happening right now: Franchisors have until December 31st—that’s less than 5 months now—to get their SBA Franchisor/Distributor Certification done. Miss that deadline? Their franchisees are out of luck come January 1, 2026. No SBA financing. Period.
I’m watching franchisors scramble to get compliant. The smart ones started months ago and are already seeing the benefits—predictable processing and streamlined deals. The ones who waited? They’re about to learn an expensive lesson about procrastination, and their franchisees are already feeling the pressure.
For lenders, this has been good news if you adapted quickly. Predictable processing, clear eligibility standards, and no more guessing games about whether a franchise qualifies. The SBA Franchise Identifier Codes are back, which means streamlined procedures for listed franchises.
But here’s what I’m seeing in the market: unlisted franchises are basically dead in the water. No more case-by-case analysis. If it’s not on the directory, it’s not getting SBA financing. The lenders who pivoted their franchise portfolios early are winning deals while their competitors are stuck with unmarketable opportunities.
System changes are separating the prepared from the panicked
The technical updates are where I’m seeing the biggest operational differences between lenders. E-Tran now requires 100% ownership disclosure—not just the 81% beneficial ownership we’re used to. Every single owner, direct or indirect, with dates of birth for individuals and formation dates for entities. Before you get SBA authorization.
The lenders who updated their intake processes immediately are processing loans smoothly. The ones who didn’t? They’re scrambling to collect additional ownership information mid-process and explaining to frustrated borrowers why their applications are stalled.
OFAC sanctions compliance got serious, and it’s showing who was cutting corners. Mandatory screening of everyone—applicants, owners, guarantors—against Treasury sanctions lists. And you better keep that documentation in your files because the SBA is checking. I’ve seen lenders lose deals over sloppy OFAC documentation that would have slid through before June 1st.
CAIVRS checking is now universal, and this is catching people who would have slipped through the cracks before. Every lender, including CDCs, has to verify Credit Alert Verification Reporting System records. No exceptions. This catches people with prior federal losses or outstanding federal debt. The lenders who integrated this into their pre-qualification process are saving time by screening out bad deals early.
Here’s a practical one that’s hitting everyone: hazard insurance requirements now kick in at $50,000 instead of $500,000 for 7(a) loans. That’s a lot more loans needing proper insurance documentation. Real estate needs mortgagee clauses, personal property needs lender’s loss payable clauses. No insurance? No loan. The lenders who updated their insurance coordination early are closing deals while others are scrambling to fix insurance issues at the last minute.
The tax transcript verification through Form 4506-C is mandatory now, and this is where preparation is really showing. When IRS comes back with “no records found,” you can still proceed, but you need both proof of filing AND proof of payment that reconciles with the stated tax liability. The lenders who built this into their underwriting workflow from day one are moving fast. The ones who didn’t are dealing with delays and borrower frustration.
Construction lending reality check
Performance bond thresholds dropped from $500K to $350K, and this brought a lot more construction projects under comprehensive bonding requirements. Performance bonds, labor and materials payment bonds, builder’s risk insurance—all of it now applies to smaller projects.
The “do what you do” language is completely gone from construction lending, and I’m seeing which lenders adapted their construction departments properly. Every lender has to verify financial information and implement commercially reasonable monitoring with funds control for all disbursements. No more internal policies without SBA guidance.
DIY construction projects still have some flexibility, but the enhanced due diligence requirements are separating the prepared lenders from the ones who got caught off-guard. You can justify costs with two bids from unaffiliated contractors or one estimate from your internal construction team, but self-managed projects need enhanced due diligence and formal Document and Cost Reviews.
Look, construction loans have been a problem area for years. These changes slowed down processing and increased documentation, but they’re stopping the bleeding on construction loan losses. The lenders who invested in proper construction oversight from day one are seeing the benefits now.
504 program gets some relief—if you’re doing it right
Finally, some good news that the prepared lenders are already capitalizing on. Environmental assessment procedures got streamlined for clean properties. CDCs can now authorize approval and certify in E-Tran without additional SBA approval when there’s no contamination. This is speeding up the majority of 504 transactions for lenders who updated their environmental processes.
But if contamination is identified, you’re following all Environmental Professional recommendations and submitting documentation for SBA review before disbursement. Environmental reports have to be dated within one year of SBA loan number issuance.
The big win that forward-thinking lenders are already using? Energy Public Policy Project caps are eliminated. No more $16.5 million limitation on energy efficiency and renewable energy projects. This opened up financing for larger-scale energy projects while keeping environmental compliance intact.
What you need to do if you’re behind
If you’re reading this and realizing you’re behind, here’s your emergency action plan. I’m not kidding about the urgency—every day you wait, your competitors are pulling further ahead:
Emergency Actions:
- Download and read the complete SOP 50 10 8 document—all of it, not just a summary
- Audit your current loan pipeline for compliance gaps
- Schedule immediate comprehensive staff training for everyone touching SBA loans
- Contact your franchise partners about certification status NOW
- Update your E-Tran procedures for 100% ownership disclosure immediately
System Updates You Should Have Done Months Ago:
- CAIVRS and OFAC verification procedures
- Tax transcript verification processes
- Hazard insurance documentation at $50K threshold
- Enhanced construction monitoring procedures
Critical Deadlines Still Coming:
- December 31, 2025: Franchise Directory certification deadline—less than 5 months away
The December 31st franchise deadline is non-negotiable. If your franchise partners miss it, their franchisees lose SBA financing access on January 1, 2026. If you haven’t started those conversations, you’re already behind.
The bottom line—10 weeks in
This wasn’t just another SOP update—it was a fundamental shift back to program integrity, and the market has already sorted out the winners and losers. The SBA got tired of losing money on loose underwriting and fixed it. The “easy money” days are over, and they’re not coming back.
But here’s the thing I’ve been watching: if you’re a real lender who knows how to underwrite properly, these changes are helping you dominate. They leveled the playing field and eliminated the cowboys who were cutting corners. The disciplined lenders who adapted quickly are winning market share from the ones who thought they could coast.
The lenders crushing it in this new environment have three things:
- They took the training seriously and actually understand the new requirements
- They built systems and procedures that ensure compliance from day one
- They have the discipline to follow SBA guidelines instead of trying to work around them
I’ve seen program changes before, but nothing this comprehensive. The SBA is serious about protecting taxpayers and restoring program integrity. The lenders who got on board early are dominating. The ones who fought it or tried to find workarounds are getting crushed.
After 26 years in this business, I can tell you: adapt or die isn’t just a cliché in SBA lending anymore. It’s reality. And the last 10 weeks have proven exactly who was ready for that reality.
The market has spoken. What’s your next move?
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