Why SBA Loans Are Now Harder to Get—and Take Longer to Fund

The Small Business Administration (SBA) was created in the 1950s as a federal agency aimed squarely at supporting small businesses – it provides counseling, funding, and all the information an SMB might need. But as of late, small business owners looking for SBA funding are facing increasingly steep hurdles. Recent rule changes and internal restructuring within the SBA are not only tightening access to capital: they’re also stretching the timeline to get funds into your hands. Let’s dig in to what’s changing—and what it means for your Q4 plans.

Stricter Lending Requirements Under SOP 50 10 8

As of June 1, 2025, the SBA enacted sweeping updates to its Standard Operating Procedures (SOP 50 10 8), effectively rolling back more flexible underwriting policies from prior years. These updates significantly raise the bar for eligibility and preparation. Key changes include:

• U.S. ownership requirement: Borrowers must now be 100 percent U.S. citizens or lawful permanent residents, up from 51 percent previously.
• Loan size limits: The “small loan” threshold for 7(a) loans dropped from $500,000 to $350,000—meaning more applications face stringent review.
• Minimum equity injection: Borrowers must contribute at least 10 percent equity, with 5 percent in cash.
• SBSS credit score raised: The minimum score increased from 155 to 165.
• Lower collateral threshold: Hazard insurance is now required for loans above $50,000, reduced from $500,000.
• Tighter ownership and documentation rules.

SBA Loans Now Harder—and More Costly—to Qualify For

According to Investopedia, a number of changes have further restricted SBA 7(a) loans:

• The previously flexible underwriting (“Do What You Do”) is eliminated, and lenders must follow rigid SBA rules now (The Biden Administration allowed lenders to set their own standards to determine creditworthiness).
• Personal income and assets are now scrutinized under the “credit elsewhere test,” potentially disqualifying applicants with sufficient liquidity.

SBA Reorganization Slows Everything Down

The SBA is undergoing a dramatic reorganization, slashing its workforce by about 43 percent through the elimination of roughly 2,700 positions—particularly those involved in pandemic relief and DEI initiatives. While some core programs remain intact (veteran and manufacturing support, for instance), staff reductions and shifting priorities are slowing down processing and funding timelines.

Backlash Over Canceling Advisory Services

Lawmakers are raising alarms. Democratic members of the Senate Small Business Committee condemned the delays and potential cancellations of SBA coaching and training services championed by Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs), SCORE, and Veterans Business Outreach Centers (VBOCs). Cuts to these services, combined with budget proposals that eliminate hundreds of support centers, threaten crucial non-loan assistance for small business owners.

M&A and Contracting Rules Add Pressure

For businesses involved in government contracting or acquisitions, new rules are adding urgency—and complexity. The SBA delayed its new post-merger recertification rules until January 17, 2026, giving a brief window for transactions to close under the old system. Even so, brokers now report average delays of 30 days, and 41 percent say closings are slowing significantly. Underwriting criteria have also tightened, further delaying funding.

What This Means for Small Business Owners

1. Start as Early as Possible: With more documentation, equity, and stricter criteria, loan preparation can take significantly longer.
2. Plan for More Upfront Costs: Higher equity injections, insurance, and guarantee fees increase initial cash needs.
3. Seek Expert Guidance: Hiring an experienced SBA-savvy lender or advisor may be more necessary than ever.
4. Explore Alternatives: Consider other financing—like a line of credit from ARF Financial, community loans, grants, or private credit—if SBO loans now feel prohibitive.
5. Advocate for Support: Encourage your local SBA resource partners to stay funded—and spread the word about service cuts.

In short, today’s SBA isn’t exactly the quicker, more flexible lender of recent years. Tighter underwriting, elevated documentation demands, reorganization, and delays mean that small business owners need to be more strategic, prepared, and patient when seeking public-backed funding.

As the backbone of the economy, small businesses deserve unwavering support and investment. That’s why we here at ARF Financial promise to keep an eye on the latest news from Capitol Hill, including recent investments and opportunities for small business owners like you. Because you’ve got plenty of work on your plate—so let us keep you posted on new rulings, regulations, and updates surrounding all things small business!

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