Regulatory Reference

SBA SOP 50 10 8.1 Regulatory Reference

By David Jones, MAI, CCIM

A consolidated practitioner reference to Standard Operating Procedure 50 10, Version 8.1, the operative rulebook for SBA 7(a) and 504 underwriting for applications assigned an SBA loan number on or after October 1, 2026, reconciled against SOP 50 10 8, 13 CFR Part 120 and the notices issued between June 2025 and August 2026. Version 8 remains operative for applications numbered through September 30, 2026, and its rules are retained below wherever 8.1 leaves them unchanged.

Operative Document

Transition Rule

The test is the loan-number date, not the application, letter-of-intent or submission date. For a delegated lender, issuing the loan number is a step the lender controls, so the effective date operates as a timestamp. A file submitted on September 25, 2026 that is not numbered in E-Tran until October 2, 2026 is underwritten under 8.1. SBA has not published edge-case guidance for increases, modifications, withdrawn-and-reinstated applications or approved-but-unclosed loans that straddle the line; treat those as open questions to be confirmed with the lender's SBA district counsel or the Office of Capital Access. Congress passed a continuing resolution funding the government through December 11, 2026, so E-Tran is expected to remain open through the transition.

In practice, these SOP 50 10 8.1 rules play out differently by asset class: hotel feasibility studies must address the special-purpose 504 equity step-up and franchise PIP costs, car wash feasibility studies must support membership revenue and environmental review, and multifamily feasibility studies must separate eligible owner-occupied mixed-use from passive residential investment. The Leander limited-service hotel case study and Round Rock express car wash case study show how lenders read those requirements.

Notice Sequence, June 2025 to August 2026

The June 2025 baseline was amended by the following notices, most of which 8.1 incorporates. Credit teams underwriting Version 8 files numbered through September 30, 2026 must read the base SOP together with each addendum; from October 1 the consolidated 8.1 text governs.

1. Owner-Occupancy Tests

Unchanged by 8.1. Codified at 13 CFR 120.131 and restated in Subparts B and C. Occupancy is calculated on rentable square footage of the subject property and is tested separately for existing buildings and new construction. Loan proceeds may not be applied to improve any space permanently leased to third parties.

In Eligible Passive Company and Operating Company structures, the EPC must lease 100 percent of the asset to the OC. The occupancy threshold is then measured against the OC's physical usage of the space.

2. Equity Injection Matrix

Version 8 restored a fixed equity injection matrix, eliminating the "do what you do" lender flexibility of prior SOPs. Version 8.1 keeps that matrix for start-ups, special-purpose property and 504 projects, and replaces the single change-of-ownership line with four transaction categories defined in Appendix 15.

Reduction or elimination for a Business Expansion or Owner Buyout requires a documented lender finding that the borrower has sufficient liquidity and working capital to sustain operations after the transaction, that the applicant's balance sheet did not show a negative net worth at the last fiscal year-end, and that no permanent working capital is included in this or any other 7(a) term loan request within 90 days; working capital needed to support the transaction must come from existing cash or a line of credit.

2.1 Equity Sources Under Appendix 15

Version 8.1 divides injection sources into two buckets. This replaces the Version 8 rule that capped only seller standby debt at half the injection.

Distributions to a non-controlling minority investor whose capital satisfies the injection are prohibited until the 7(a) loan is repaid, except amounts made solely to satisfy the investor's tax obligations attributable to the business's income. Where the purchase price exceeds the value supported by the business valuation and the Quality of Earnings report, additional Limited sources may fund the gap, but any such funds must be on full standby. Out-of-pocket business valuation and Quality of Earnings costs count toward the injection.

Seller notes still count as equity when on full standby. The full-standby condition dates from Version 8 (June 1, 2025), not from 8.1. What 8.1 changed is the shared 50 percent cap with minority-investor equity, a seller-note seasoning period of 36 months (up from 24) before the note may be refinanced, and a seller consulting period of up to 24 months in aggregate (up from 12). Operators evaluating the capital stack can model the resulting bank, CDC and equity tranches in the calculator suite.

3. Appendix 15: Change of Ownership Categories

New in 8.1. Every 7(a) change of ownership is sorted into one of four categories, coded in the SBA loan system. Initial Acquisition is the default; the lender must document in the credit memorandum how the applicant satisfies any other category. Where any other section of the SOP conflicts with Appendix 15, Appendix 15 governs.

Processing rules across all four categories:

• 7(a) Small is not permitted for any change of ownership. Every acquisition, at any loan size, is processed under full Standard 7(a) underwriting.
• The Version 8 shortcut to a 25-year maturity where real estate was 51 percent or more of proceeds is removed in favor of a blended weighted-average maturity.
• Total 7(a) debt supporting the transaction is capped at the independent business valuation. Any excess of price over value must be funded by equity or by seller financing on full standby.
• Business Expansion under Version 8 required the same six-digit NAICS code, identical ownership and the same geographic area; 8.1 replaces those tests with the four-digit Industry Group, two-year seasoning, 100 percent purchase and guarantor-count tests above.
• Partial change of ownership rules carry forward from Version 8: eligible only as a stock or membership-interest purchase with at least one original owner remaining; asset-purchase structures are not eligible; multi-step partials are ineligible; a seller retaining any equity must give a full guaranty for the later of two years after final disbursement or twelve consecutive months current.

3.1 Quality of Earnings Requirement

3.2 Business Valuation

Every change of ownership requires an independent business valuation from a qualified source (ASA, CBA, ABV, CVA or BCA), requested by and prepared for the lender. Industry reporting is consistent that 8.1 does not carry forward the Version 8 tier under which the lender could self-value arm's-length transactions with $250,000 or less of goodwill; that removal is reported from the published text but has not been verified against a paginated official copy. The close-relationship trigger (family, existing partners, related entities, franchisor and franchisee) carries forward regardless of size.

3.3 Going-Concern Appraisal on Special-Purpose Property

Unchanged by 8.1. Where the business operates from special-purpose property, the lender must obtain a full USPAP Appraisal Report from a Certified General Real Property Appraiser who has completed at least four going-concern appraisals of equivalent special-use property within the last 36 months. The report must allocate separate values to land, building, equipment and intangible assets. Restricted Appraisal Reports and reports prepared for the borrower or seller are not accepted. On an acquisition at or above the $3 million threshold this appraisal sits alongside the business valuation and the Quality of Earnings report; the SOP assigns each report to its own decision (collateral, debt cap, coverage) and is silent on how to reconcile them where their figures diverge. That reconciliation is a matter for lender credit policy.

4. Loan-to-Value Ceilings

Unchanged by 8.1 except as noted for the 7(a) and 504 limit coordination. Governed primarily by 13 CFR 120.802 and Subpart C. The 504 ceiling is expressed as a combined stack of first-mortgage, CDC debenture and borrower equity, while the 7(a) ceiling is measured against the lesser of appraised value or purchase price.

Since July 4, 2026 (Policy Notice 5000-879058) the 7(a) and 504 maximums are decoupled: a borrower may hold up to $5 million of 7(a) exposure and up to $5 million of 504 debenture concurrently. SBA's per-borrower guaranty exposure remains $3.75 million ($4.75 million for qualifying export loans). For real-estate-heavy acquisitions the practical structure is a 504 on the owner-occupied real estate and long-life equipment and a 7(a) on goodwill and working capital, each carrying its own feasibility and appraisal triggers.

5. Debt Service Coverage Standards

Version 8.1 retains the Version 8 architecture for non-acquisition 7(a) loans and 504 and installs category-specific floors for changes of ownership.

The Appendix 15 historical test is defined as EBITDA divided by combined post-transaction debt service, measured on either the last fiscal year-end or an average of the last two fiscal year-ends, on a historical or adjusted basis, with a rent add-back where owner-occupied real estate is acquired. The denominator includes the new SBA debt, existing debt as structured after closing and any seller debt that is not on full standby; seller debt on full standby is excluded. Interest-only seller notes are underwritten on an amortization not exceeding ten years for the test; lines of credit are excepted. Projections are reviewed but may not be relied upon to meet the floor. Where a Quality of Earnings report is required, its adjusted earnings figure is the one used. The historical ratio is coded in the SBA loan system.

Debt yield is not a required SBA metric under either version. Where lenders apply a debt yield overlay, it reflects institutional policy rather than regulatory obligation. DSCR modeling for specific transactions, including the historical-basis test, can be run through the DSCR Calculator.

6. Refinance Parameters

6.1 SBA 7(a) Refinance (Appendix 14)

Version 8.1 consolidates all 7(a) debt-refinancing requirements into a new Appendix 14. The Version 8 tests carry forward with two changes noted.

• The new installment must be at least 10 percent lower than the existing installment to satisfy the substantial benefit test. Exception: for refinancing of federal or government-guaranteed debt, the 10 percent benefit test is removed.
• The debt being refinanced must have been current for at least 12 months, with no payment more than 29 days past due.
• Same-institution debt: 8.1 change. Refinancing of the lender's own debt may now be processed under PLP delegated authority, subject to 13 CFR 120.452, under which a lender may not use delegated authority to reduce its own exposure or shift a potential loss to SBA. Under Version 8 this required non-delegated processing.
• Merchant cash advances and factoring: 8.1 change. Active merchant cash advance and factoring obligations remain ineligible for refinancing, but 8.1 adds a path for debt that originated as a merchant cash advance once it has been converted to qualifying term financing.
• SBA-guaranteed debt is generally not refinanceable, absent the narrow "substantial benefit plus lender unable or unwilling to modify" carve-out.
• Seller debt structured in a 7(a) change of ownership is eligible for refinancing after it has been in place and current for 36 months (Appendix 15; 24 months under Version 8).

6.2 SBA 504 Refinance Without Expansion

Unchanged by 8.1. Governed by 13 CFR 120.882(g), as revised by Direct Final Rule 89 FR 79734 (October 1, 2024).

• Business must have been in operation for at least 2 years.
• Debt to be refinanced must be at least 6 months old and current for the last 6 months (or current for the full term if less than 12 months old).
• At least 75 percent of the original debt proceeds must have been used for 504-eligible fixed assets (lowered from the prior 85 percent standard).
• The prior 50 percent-of-debt cap has been removed.
• LTV may reach 90 percent of appraisal, with or without cash-out.
• The prior 20 percent-of-appraisal cap on Eligible Business Expense cash-out has been eliminated.

6.3 SBA 504 Refinance With Expansion

Unchanged by 8.1. Governed by 13 CFR 120.882(e).

• Existing debt refinance amount may not exceed 100 percent of the expansion project cost.
• The 75 percent "substantially all" standard for prior use of proceeds applies.
• The transaction is treated as a new 504 project, with full job creation and retention analysis required.

7. Collateral, Fees, and Rate Caps

The Version 8 collateral threshold, credit-score floor and Franchise Directory reinstatement carry forward. Maximum variable-rate spreads are governed by Procedural Notice 5000-875051, effective March 1, 2026.

7.1 7(a) Maximum Spreads Over Prime (Variable Rate)

7.2 7(a) Guarantee Fees

FY2026 schedule, effective for loans approved October 1, 2025 through September 30, 2026 (Information Notice 5000-872051). The FY2027 fee notice had not been published as of September 8, 2026; by statute new fees must be in place for loans approved on or after October 1, 2026, and the President's FY2027 budget states the 7(a) subsidy rate will again be zero. This table will be updated when the notice issues.

Interactive modeling of fees, amortization and total cost of capital is available in the SBA 7(a) Payment Calculator and SBA Fee Calculator, both of which reflect the FY2026 schedule and the March 1, 2026 spread caps.

8. Third-Party Feasibility Study Triggers

Unchanged by 8.1. Neither version enumerates an exhaustive list of transactions that require a third-party feasibility study; the codified basis is 13 CFR 120.160(b), under which SBA may require one, and the SOP leaves the decision to lender and CDC judgment. The document and attendant SBA guidance consistently call for a study in the following scenarios.

• Hotels and motels, across limited-service, select-service and full-service formats.
• Gas stations with attached convenience stores or quick-service restaurants.
• Car washes, tunnel and in-bay.
• Assisted living, memory care and other senior living formats.
• Special-use real estate including bowling centers, funeral homes, self-storage, RV parks and campgrounds.
• Startups in historically high-failure industries.
• Rural expansions and greenfield projects.
• Transactions with projections-heavy cash flow reliance, including ground-up construction, de novo locations and expansions by existing operators.

What 8.1 changes is the last category. A change of ownership in the Initial Acquisition, Owner Buyout or ESOP category can no longer be underwritten on projections; coverage must be met on historical earnings, and the Quality of Earnings report, not a feasibility study, is the third-party exhibit that proves the past. A deal that only works on a projection is therefore no longer an acquisition file. If it is restructured as a start-up, a new build or a projection-dependent expansion, it moves onto the tracks where a study is expected, and the study is prepared to the same standard as before.

The third-party study must be prepared by a qualified source that is independent of the borrower, the lender and any affiliate of either. The October 2026 SBA updates explain how the September 25 technical update, FY2027 fees and current rates affect live studies, while the SBA loan DSCR methodology reference explains the 1.10x, 1.15x and 1.25x coverage tests, and the US gas station market report 2026 applies the new acquisition rules to fuel retail, and our analysis of whether SBA acquisition loans default more reviews the loan data behind Appendix 15. An overview of study scope, methodology and deliverables is provided on the home page, with industry-specific requirements organized by asset class.

9. Citations and Official Sources

For an asset-by-asset application of these rules to rates, cap rates and loan sizing, read what SBA debt can actually support by asset class. The report separates market value from the price supportable at the applicable coverage floor.

• SBA SOP 50 10, Version 8.1, effective October 1, 2026: sba.gov/document/sop-50-10-lender-development-company-loan-programs (.docx)
• SBA Information Notice 5000-880695, Issuance of SOP 50 10 8.1 (August 14, 2026)
• SBA SOP 50 10, Version 8, effective June 1, 2025, and Information Notice 5000-868665 (May 29, 2025)
• SBA Procedural, Policy and Information Notices 5000-872764, 5000-872050, 5000-875701, 5000-876441, 5000-876626, 5000-876777, 5000-875051, 5000-877673, 5000-879058, 5000-879464, 5000-881477
• SBA Information Notices 5000-872051 (7(a)) and 5000-871532 (504), FY2026 fee schedules, effective August 28, 2025
• 13 CFR Part 120, Subparts B and C: ecfr.gov
• 13 CFR 120.131 (owner-occupancy), 120.160(b) (feasibility study), 120.452 (delegated authority), 120.802 (504 financing), 120.882(e) and (g) (504 refinance)
• Direct Final Rule 89 FR 79734 (October 1, 2024), 504 refinance without expansion
• Government Accountability Office, Opinion B-338157 (July 1, 2026), Congressional Review Act applicability of the March 2026 SOP amendments

This reference is prepared for practitioner use and does not constitute legal, tax or regulatory advice. SBA publishes SOP 50 10 8.1 only as a Word document; citations reference the document's internal headings, and provisions marked as reported from industry sources have not been verified against a paginated official copy. SBA policy is subject to change through information notices, procedural notices and rulemaking. Always verify the operative rule against the current SOP and applicable Federal Register notices at the loan-number date.