Effective June 1, 2025, the Small Business Administration (SBA) revised the requirements for two of its largest small business loan programs. Both the 7(a) and 504 loan programs now have stricter underwriting and ownership standards. Business owners seeking financing should be informed about the updated regulations before attempting to obtain a loan.
Underwriting
The SBA is returning to pre-2023 underwriting standards for 7(a) loans, bringing more rigorous underwriting criteria. For example, more loans will require collateral and the threshold for such collateral will begin at $50,000, down from the previous level of $500,000. Staying true to the pre-2023 standards, borrowers will now need to contribute an equity injection of 10% of the project costs for both start-ups and ownership changes. Also conforming to pre-2023 standards, the threshold for a 7(a) small loan was lowered to $350,000 from $500,000, and the minimum business credit score was raised from 155 to 165.
Citizenship Requirement
As for ownership, the previous standards permitted a company obtaining an SBA backed loan to be owned only fifty-one percent by a U.S. Citizen, a U.S. National, or a Lawful Permanent Resident. Now, one-hundred percent of direct and indirect owners, loan guarantors, and top-level managers must be U.S. Citizens, U.S. Nationals, or Lawful Permanent Residents. No owner, loan guarantor, or top-level manager may be an ineligible person, defined as a foreign national, refugee, asylee, conditional Lawful Permanent Resident, visa holder, Deferred Action for Childhood Arrival (DACA) recipient, or an alien, as those terms appear in existing federal law. Companies that enjoy SBA backed loans may not employ aliens, but may employ most other ineligible persons in non-key employment roles. With the new wholly owned requirement, there also is a six month look-back period during which an ineligible person may not be an owner of the company. If so, the company will not be eligible for an SBA loan unless the ineligible person has formally severed all ties with the company, and the company is owned and overseen only by eligible persons.
Manufacturing Companies
In addition to the new regulations, a proposed bill titled Made in America Manufacturing Finance Act of 2025 aims to amend the Small Business Act by raising the maximum SBA loan amount for manufacturers from $5 million to $10 million. This bill would alter both the 7(a) and 504 lending programs, and would be available to businesses that are solely within the United States. Manufacturing companies in a wide range of sectors (including, but not limited to: petroleum, wood, textiles, chemicals, rubber, minerals, computer parts, electrical equipment, transportation equipment, fabricated metal goods) would be eligible for the increased loan amounts.
Abraham Frangie practices in the firm’s Business Law and Litigation groups. For more information on the revised SBA loan program requirements, please contact Abraham Frangie at afrangie@ammlaw.com. To learn more about Antheil Maslow & MacMinn’s Business Law Services, please visit our Business & Finance pages at ammlaw.com.