The World of SBA lending in 2025
Changes, Updates and Advantages, the Options are Almost Endless
Building success through the sharing of information.
By Steve Mariani
February 2025
From the buyers being allowed to put zero money down, to securing multiple $5MM SBA loans for the same borrower. So much has changed in SBA lending over the last 24 months that most intermediaries are not aware of and can be costing you transactions.
It still (after 30 years) boggles my mind when I speak with brokers around the country that aren’t aware of even the most basic SBA changes that can greatly affect their commissions. I take for granted that every lender updates their referral sources on a consistent basis and makes them aware of SBA changes that may affect their current listings. The reality is that not many of the lender BDO’s are even up to speed on many of the changes. We’ve seen some lenders take up to a year to understand and adjust credit policies to address these changes, and this could be costing you transactions.
Everyone knows (hopefully) about the partial buyouts or reduced down-payment options, to name just a few. Today I will go through some of the top changes that everyone needs to understand and consider as you introduce your buyers and sellers.
Let’s start with the down-payment reductions and rules surrounding this incentive. The latest SOP states that a seller can now hold the entire down payment amount on full stand-by for 24 months and a buyer can then qualify for an SBA 7a acquisition loan. Before you get too excited and begin searching your database for buyers with no money, there’s a few things to note. Since this rule was written, we’ve not seen one approved or even know of one that closed by any lender. The most aggressive lenders that we know will go as low as 2.5% down payment but no lower. Still a very attractive amount for those buyers internal to the business or with a strong direct resume’ into an industry.
Forgivable seller notes that can bridge the buyer / seller price gap. The SBA finally came out and clarified that my “Forgivable Seller Note” structures are eligible under the SBA 7a program provided they always are to the benefit of the buyer. We have always structured these to the benefit of the buyer, and now these can be used by all lenders in many scenarios. Examples that our firm have used in the past include seller notes tied directly to employee retention, specific vendors, customer concentration concerns and more. This is a great tool, and in most cases, will alleviate any business valuation concerns as well.
Borrowers on smaller transactions can also feel relief as the SBA no longer requires a lien on secondary collateral for loans of $500K or less. Personal residences and outside collateral positions are now only lender policy and not required by SBA, no matter how much equity one might have. These loans also enjoy no SBA fees through September 30, 2025.
The major change to the rules is now the “Partial Buyout” clause which states a buyer can now purchase a percentage of a business using SBA funds. This rule has since been expanded to include a 2-step process which also now allows a borrower to form a new entity and bring the seller in as a minority owner, something never allowed previously by SBA since its inception. The rule now allows a seller to retain up to 19% ownership of the selling entity and not have any personal liability for the loan moving forward.
The biggest rule change that can help your higher-net-worth clients is the updated affiliation rule. This rule now states that if a borrower owns an affiliate business, in the same industry, we must determine if they own over 50%. Less than 50% ownership will now not count against a borrower’s personal SBA maximum limit of $5MM. This allows a second loan of $5MM to be written to the same buyer. If that affiliate business is in a different 3-digit NAICS code, then this affiliate again does not count and allows another SBA loan to be written to this borrower. If each business is in a different 3-digit code, multiple (unlimited) loans can be written and approved under the latest SBA SOP.
Overall, we see nothing but positive news from lenders, brokers, and clients so it’s time to buckle up for 2025 and let’s get started!
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You can reach out directly to me at Stevem@easysba.com or my direct dial at 919.376.2922.
I hope today’s letter was informative and please feel free to share with anyone that you believe can benefit from it. We’re dedicated to the success of the intermediary.
Steve Mariani
Owner, Diamond Financial Services
(888) 238-0952