The landscape of SBA lending is continually evolving, and staying ahead of policy updates is paramount for lenders. The recent issuance of Standard Operating Procedure (SOP) 50 10 8, effective June 1, 2025, introduces critical adjustments to how changes of ownership are handled.
A key clarification in this SOP update is that the new guaranty requirements apply only to partial changes of ownership. These rules do not impact 100% changes of ownership (like full asset or stock purchases) or full partner buyouts where the seller exits completely. This distinction is crucial for structuring compliant and sound SBA loans.
What are the Key Changes to Ownership and Guaranty Requirements?
SOP 50 10 8 brings clarity and new stipulations for transactions involving partial changes of ownership in Standard 7(a), 7(a) Small, and SBA Express loans. The primary shift revolves around who qualifies as a co-borrower and, more significantly, new guaranty requirements for sellers maintaining a minority interest post-sale.
The ‘Why’ Behind the New Seller Guaranty
While the SBA has not formally stated its reasoning, this change appears to be a strategic move to strengthen credit quality. The new rule ensures that sellers who financially benefit from an SBA loan by receiving sale proceeds remain committed to the business’s success during the critical post-closing transition. This limited guaranty adds a layer of protection for the lender, potentially in response to data showing higher early default rates on these specific transaction types.
However, this may also disincentivize some sellers from retaining a minority stake, pushing deals toward full buyouts. It also impacts passive investment models, like those used by search funders, by requiring all new owners to become co-borrowers.
Deep Dive: Seller Guaranty Requirements For Partial Change of Ownership Under SOP 50 10 8
The SOP outlines specific requirements that lenders must be acutely aware of for partial changes of ownership:
- New Owners as Co-Borrowers: A crucial clarification is that any new direct or indirect owner acquiring any percentage of ownership in the Operating Company must be a Co-Borrower on the new loan. This applies even if the acquired interest is as small as 1%. In addition to providing all financial information necessary for the lender to fully analyze the borrower and incorporate into the cash flow analysis, for Standard 7(a) loans, all Borrowers and Co-Borrowers must be prepared to use their personal assets to cover collateral shortfalls.
- The Seller Stakeholder Guaranty – A New Mandate: The most significant change impacts selling owners who remain involved in the business with a reduced ownership stake. If a selling owner (one who receives payment for selling part of their ownership) retains less than 20% of the business post-sale, they are now required to provide a guaranty for the full loan amount.
- Term of this Specific Guaranty: This isn’t an indefinite guaranty. Its term must be for the later of:
- A period of at least 2 years after the final loan disbursement; OR
- Until the loan has been current (making payments according to the Note terms and not on deferral) for 12 consecutive months.
- Formality: Lenders can use SBA Form 148L or their own equivalent form for this guaranty. It’s important to note that on SBA Form 148L, the term “default” refers to default as defined in the loan Note.
- Collateral Implications: Significantly, these specific guarantors (selling owners with <20% remaining who are providing this 2-year/12-month current payment guaranty) are not required to pledge their assets in the event of a collateral shortfall. This is a key distinction from other guarantors or co-borrowers.
- Remaining Owners’ Guaranties: For other remaining owners (those not selling or selling owners who retain 20% or more), their guaranty requirements will continue to be based on their post-sale percentage of ownership in the business, as detailed in Section A, Chapter 5, Paragraph A of the SOP (“Guaranties”).
Why This Matters for Lenders
These updated guidelines on ownership changes and seller guaranties present both new complexities and opportunities for lenders:
- Risk Mitigation with Seller Commitment: The limited guaranty from a selling owner who retains a minority interest offers an additional layer of assurance. It ensures the seller remains committed to the business’s success during a critical transition period without the indefinite personal asset exposure typically associated with full guaranties.
- Structuring Complexity: Lenders must carefully identify all new owners, regardless of their small (direct or indirect) ownership percentage, and ensure they are included as co-borrowers. Distinguishing between the new seller guaranty requirements and traditional guaranty rules is crucial.
- Documentation Precision: Accurate documentation, including the correct guaranty forms (like SBA Form 148L or an equivalent) and clearly defined terms, is essential to meet SBA compliance.
Impact on Borrowers
For small business owners involved in a partial sale or purchase:
- Sellers Remaining with Minority Stake: If you are selling a portion of your business but plan to stay on with less than 20% ownership, be prepared to provide a limited guaranty for the SBA loan. Understanding the specific two-year or 12-month current payment term is important.
- New Minority Owners: If you are acquiring even a small stake in a business through an SBA-financed transaction, you will likely be required to be a co-borrower on the loan.
Your Partner in Structuring Complex Ownership Changes
The new seller guaranty requirements in SOP 50 10 8 add a layer of complexity to structuring partial changes of ownership. Properly identifying all co-borrowers and applying the correct guaranty terms is essential for compliance, and any misstep can put the SBA guaranty at risk. Navigating these detailed requirements demands precision, but you don’t have to face this challenge alone.
This is where Windsor Advantage becomes a critical partner. With more than 150 years of cumulative SBA lending experience, our team has the deep expertise required to give you confidence when structuring complex deals involving changes of ownership. We provide banks, credit unions, and CDFIs with a comprehensive outsourced SBA 7(a) and USDA lending platform, built on cutting-edge technology and rigid, consistent processes.
For lenders working through the nuances of partial buyouts and the new seller stakeholder guaranty, Windsor Advantage acts as an extension of your team. We ensure every loan is structured and documented with the highest level of diligence, mitigating compliance risks and allowing you to confidently facilitate ownership transitions for your small business clients.
If you have questions about structuring loans involving changes of ownership or need assistance with prequalification under the new SOP 50 10 8 guidelines, please don’t hesitate to reach out to our experts at [email protected].
Stay Informed with Windsor’s SBA Alerts
Stay up to date on the latest news and tips for SBA lenders. Subscribe to the Windsor Advantage Newsletter.