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Tips from our SBA Program Director

SBA Rule Updates Effective June 2025

Beginning June 1, 2025, the Small Business Administration (SBA) established new program rules. Many of these are actually a return to old SBA rules that were abandoned or adjusted with the previous administration. Here are highlights of major changes made: 

Tighter Eligibility Requirements:
  • 100% U.S. Ownership: Businesses must now be entirely owned by U.S. citizens, nationals, or lawful permanent residents. This disqualifies businesses with even partial foreign ownership, including visa holders, refugees, and DACA recipients.
  • Employment Restrictions: Borrowers cannot employ undocumented workers, which may affect industries that rely on immigrant labor.
  • Lenders are required to document 100% of the ownership and their eligibility.
Franchises:
  • The SBA franchise directory has been reinstated (previously discontinued in May 2023).
  • Franchisors must be listed in the directory and meet new certification requirements.
  • Franchises not listed can apply for inclusion.
  • Lenders no longer assess franchise eligibility, but rather reference the directory.
Changes of Ownership:

The SBA still allows:

  • Full ownership changes
  • Partner buyouts
  • Partial ownership changes (new owners joining while existing ones stay)
    • Personal guaranty rules for partial changes have been modified to offer some flexibility.
Start-Up Financing:
  • Mandatory 10% Equity Injection: Start-ups (businesses with less than one year of revenue) must now provide at least 10% equity, reducing flexibility for new entrepreneurs.
Stricter Lending Standards:
  • Underwriting Rules Reinstated: The SBA has eliminated the more flexible “Do What You Do” policy, requiring lenders to follow SBA-specific underwriting standards. This could:
    • Make it harder for marginal borrowers to qualify.
    • Result in lenders taking longer to process an SBA loan.
  • Higher Credit Score Thresholds: The minimum SBSS (Small Business Scoring Service) score for 7(a) small loans (up to $350,000) has increased from 155 to 165.
Overall Impact:

Pros:

  • More consistent and safer lending practices
  • Reduced risk of defaults
  • Clearer eligibility criteria

Cons:

  • Harder for some businesses to qualify
  • Increased compliance and documentation
  • Potential delays in loan processing
  • Limited access for immigrant entrepreneurs

While these highlights cover some of the most impactful SBA rule changes, many more updates are now in effect. As these new requirements roll out, Community First Bank of Indiana is here to guide you through every step—so your business can move forward with clarity and confidence.


Not sure how the new SBA rules impact your plans? Let’s talk. Our SBA lending team is ready to help you navigate the changes and find the right path forward.

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