SBA Loans Harder to Get in 2025? Here's What You Need to Know

If you've been following the lending program under the Small Business Administration (SBA) for U.S. business acquisitions, you might have felt the shockwaves from the changes made this past spring.

On April 22nd, 2025, the SBA released a brand new Standard Operating Procedure (SOP) that fundamentally changed their flagship 7(a) loan program.

These changes went into effect June 1st, and they're not minor tweaks… They're seismic shifts affecting business acquisitions, debt refinancing, startups, and more.

SBA lender Ray Drew recently released some great analysis [VIDEO] breaking down what changed. So, if you're planning to acquire a business using SBA financing, here’s some of Ray’s can’t-miss news:

The Big Picture: Welcome Back to Old School Banking

First, let's understand what happened in the past:

The SBA dramatically loosened their guidelines in 2023, making it easier than ever to get funded. But here's the problem: defaults increased, they waived fees on most loans, and the SBA actually lost money in 2024.

So they tightened the reins… Hard.

They've not only rolled back many 2023 changes but added new guardrails to protect the program. So, getting approved just got significantly harder.

The 3 Fatal Blows

Let’s start with the worst news first — Here’s 3 types of financing scenarios got demolished:

1. Merchant Cash Advances Are Now a Death Trap

You can no longer refinance MCAs or factoring agreements with SBA loans. That escape hatch you might have been counting on? Gone.

Think twice before taking on either of these forms of high-cost financing, because you won't be able to use an SBA loan to dig yourself out.

2. The Small Loan Program Got Kneecapped

The SBA 7(a) small loan program, which went up to $500,000 a few years back, got slashed back down to $350,000.

But it gets worse:

• The minimum SPSS credit score increased from 155 to 165

• Red tape that was removed is now back in place

• Loans over $350,000 now require you to pledge all available collateral, including second liens on your personal residence

3. Partial Change of Ownership? Dead on Arrival

This one hits close to home for acquisition entrepreneurs.

The 2023 rule allowing sellers to retain partial ownership while the buyer got SBA financing? It was brilliant… until they ruined it.

Now, if a seller stays on with any ownership:

• They must personally guarantee the buyer's loan for 2 years

• Any investors on the cap table — even with just 1% ownership — must sign onto the loan

This makes partial change of ownership transactions virtually impossible.

The New Requirements That Impact Everyone

Beyond those 3 major casualties, here are the critical changes affecting business acquisitions specifically:

Equity Injection is Back (and Stricter)

When buying a business with an SBA loan, you now need:

• Minimum 10% equity injection of the total project cost

• Seller notes only count as equity if on full standby for the life of the SBA loan

• You can use seller financing for up to 5% of the required injection (meaning 5% cash, 5% standby seller note)

Franchise Directory Returns

If you're buying a franchise, it must be listed in the SBA's franchise directory... No exceptions.

The "Credit Elsewhere" Test is Fully Enforced

Lenders now must document why you need this loan. High-net-worth individuals with substantial liquid assets have a much harder time qualifying. The SBA wants to help people who truly need access to capital, not wealthy individuals who could be perceived as gaming the system.

Startup Minimum Injection is Defined

Starting a business with SBA financing? You need 10% skin in the game, minimum.

What This Means for You

These changes represent a fundamental shift back to prudent, old-school banking practices.

The "easy money" era of 2023-2024 is over, and we're now seeing the full impact of that shift.

If you're planning a business acquisition using SBA financing:

1. Reassess your financing strategy if you were counting on creative seller financing structures

2. Prepare for more scrutiny on credit, collateral, and cash injection requirements

3. Document everything to prove you can't get financing elsewhere

4. Plan for higher equity requirements than you might have needed just 2 years ago

So, while the SBA program isn't dead, its return to conservative roots has made financing more challenging. For serious acquisition entrepreneurs with solid deals and reasonable down payments, this is still a great financing tool.

But the days of minimal equity, hyper-creative structures, and loose requirements? Those are behind us.

Thanks for reading Acquiring & Exiting.

Acquiring & Exiting is brought to you by the same team behind the Business Acquisition Summit.