Banks will see lower fees, and borrowers can anticipate larger loan sizes, as well as new guidelines on how these funds can be used. Learn more about the changes in the SOP and how they may help small business owners qualify for loans.
Higher Loan Amounts
The SBA officially increased the limit on 7(a) Small Business Loans from $350,000 to $500,000. The SOP guidelines confirm the previous announcement made in May 2023. They also make it easier for lenders. The maximum amount that can be borrowed from 7(a), according to the agency, is $5 million. A borrower can have as many as 10 small 7(a) loans. Small loans have fewer requirements, which could help to expand lending.
Reduced Paperwork
The SBA has also reduced the paperwork required. Previously, lenders were required to review three years of tax returns for businesses, a full analysis of guarantors, and monthly financial reports. The latest guidelines allow lenders to streamline their underwriting process by not requiring these documents. This may also speed up loan approvals, allowing borrowers to access capital faster. Note that lenders can always ask applicants for additional paperwork or information to determine whether the borrower has a good credit rating.
Reduced Fees
Lenders must now charge a fee of up to $2,500 for each loan. The SBA packaging fees provide the lender with income that can be used to offset costs associated with originating the loan. Previously, lenders were able to charge different loan percentages that capped at $30,000 for each loan.
Simpler Standards for Acquisitions
Small businesses will also find it easier to make purchases with the new SOP. Businesses could buy other companies with SBA-backed loans before, but they could only do so if they assumed full ownership of the new company. SBA loans can now be used to purchase partial stakes in a business.
Insurance Requirements
The insurance requirements have become less strict, and lenders can now specify what they require. The SBA no longer requires life insurance for SBA loans, but lenders can continue to insist on it, particularly if they require it on non-SBA loans. Hazard insurance is required only for SBA loans used to purchase, improve, or refinance real estate.
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