On June 1, 2025, the Small Business Administration (SBA) implemented several changes to keep in accordance with Executive Orders 14210 and 14218. There have been numerous changes that affect all sides of the mergers and acquisitions process. From stricter underwriting standards to new and updated fees, both buyers and sellers are impacted. Here are three of the most impactful rule changes.

Stricter Underwriting Standards

The SBA reintroduced underwriting standards for 7(a) loans that haven’t been implemented since pre-2023. Due to these changes, all loans now require collateral starting at a $50,000 threshold. The minimum credit score for loans is now 165 from 155. Additionally, the threshold for a 7(a) small loan has been lowered to $350,000. Borrowers are also required to contribute an equity injection of 10% of project costs for start-up businesses and changes of ownership.

These changes culminate in longer underwriting timelines and difficulty getting approved for loans. The transition to more traditional, rigid underwriting standards will increase the time it takes for banks to ensure all deals meet said standards. The required collateral potentially creates new obstacles for previously qualified buyers.

Updated Fees

In addition to requiring collateral, the SBA reinstates upfront guaranty and lender service fees for approved 7(a) loans. In addition, an annual service fee of 0.55% for the guaranteed portion of the outstanding balance of 7(a) loans has been introduced. Businesses owned  51% or more by Veterans are exempt from the guaranty and lender service fees.

The increased cost of capital is likely to discourage buyers, resulting in a narrower pool of potential buyers for owners selling their businesses. Sellers may have a difficult time selling their business, or they could be inclined to take a less-than-optimal deal. 

More Rigorous Ownership and Citizenship Requirements

While small businesses seeking out SBA loans previously only had to be owned 51% by a United States citizen, they now must be 100% owned by a U.S. citizen. Additionally, owners must have been permanent residents for the last 6 months before seeking out a loan. The SBA will also be removing its regional offices that currently exist in sanctuary cities.

This change has the potential to stop ongoing deals in their tracks, depending on the buyer and seller involved. Additionally, it makes it entirely impossible to complete deals with individuals who have immigrated to the U.S. but haven’t obtained citizenship yet. This drastically reduces the number of potential buyers for business owners selling their business, and makes it much more difficult for non-U.S. citizens to obtain businesses themselves.

Overall, the policy changes the Small Business Administration is implementing have numerous effects on business owners and those interested in acquiring a business. In the face of all these changes, it’s especially important to connect with an expert mergers and acquisitions advisor before selling your business. Connect with a certified M&A advisor at Stony Hill today!