SBA Update for Business Acquisition Loans

This notice revises several provisions in SOP 50 10 7.1, which governs the SBA's 7(a) and 504 loan programs. The revised provisions are effective as of the date of the notice.

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Latest SBA Procedural Notice to benefit some business acquisition financings.

On December 6, 2023 the Small Business Administration (SBA) issued a Procedural Notice (Procedural Notice 5000-852522 ) clarifying and simplifying certain requirements for Borrowers
operating in leased space, equity requirements for complete partner buyouts and partial changes
of ownership, and 7(a) loan maturities for complete changes of ownership. This Notice also
clarifies provisions related to the use of 7(a) loan proceeds to refinance same institution debt.

Key Points:

  • Leased space: Lenders must obtain lease agreements and may require landlord waivers when a substantial portion of loan proceeds are used for leasehold improvements or collateral includes leased assets.

  • Ownership changes: For complete partner buyouts and partial changes of ownership, borrowers can meet minimum equity requirements through various methods, including cash contributions or debt-to-worth ratios.

  • Refinancing: 7(a) loans cannot be used to refinance existing same institution debt, unless the project size increases due to additional funds for other uses.

  • Loan maturity: For complete ownership changes, the maximum maturity is 25 years if the purchase price includes commercial real estate valued at 51% or more. Otherwise, a blended maturity can be calculated based on the assets included in the purchase price.

Additional Notes:

  • Existing SOP guidance regarding 504 loans and loan maturity for partner buyouts or partial ownership changes remains unchanged.

Our Take:

  • SBA no longer requires that a lease term must be => loan term if the loan proceeds are not financing a substantial amount of leasehold improvements or the collateral consists of a substantial portion of leasehold improvements, fixtures, machinery or equipment that is attached to the leased space. If loan proceeds are financing a substantial amount of leasehold improvements, then the lender must obtain a written copy of the lease agreement and if unable to obtain an assignment lease or landlord’s waiver then the lease term must be at least as long as the SBA loan term and any renewal options must be exercisable only by the borrower.
  • For a complete change of ownership with commercial real estate, the lender can now blend the maturity if the value of the CRE is less than 51% of the purchase price.


A complete copy of Procedural Notice 5000-852522 can be viewed here

For additional information on how these changes may benefit an SBA borrower, please get in touch with us here or call 800-616-2050.

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