The Small Business Administration (SBA) has released a revised SOP (Standard Operating Procedure), effective June 1, 2025, with several important changes impacting the SBA 504 commercial real estate loan program. These updates are designed to provide greater transparency, improve consistency throughout the lending process, and ensure continued access to affordable financing for qualified small business owners.
Please check back for the most up-to-date information and contact a TMC Financing representative to discuss your project details.
Summary of New Regulations
- Franchise Directory Reinstated – Businesses operating under a franchise, license, dealer, or similar agreement must now be listed in the SBA Franchise Directory to qualify for SBA 504 financing.
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- Through July 31, 2025: SBA lenders must use the addendum noted in the Directory (if applicable).
- By July 31, 2025: Franchisors and distributors must sign a new Franchisor or Distributor Certification
- On August 1, 2025: Any entity not certified will be removed from the Directory.
- Eligibility Requirements – SBA has clarified and standardized eligibility criteria for SBA 504 financing to ensure only actively operating, qualified businesses are eligible.
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- Business must be active and operational — not passive (e.g., real estate holding companies or management-only entities), shell companies, or pass-through entities
- Must operate in an SBA-qualified industry
- U.S Citizenship Required – 100% of direct and indirect ownership in the business must be a U.S Citizen or an unconditional Lawful Permanent Resident (LPR). Individuals holding conditional LPR status are not eligible for a 504 loan.
- Veteran-Owned Businesses – SBA 504 loan applications submitted by veteran-owned businesses will be prioritized. CDCs and Third-Party Lenders are encouraged to adopt the same practice within their internal workflows.
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- Learn more about TMC Financing’s 504 Vet Loan Advantage Program
- Lending Cap on Energy Efficient Projects – SBA has reinstated the $16.5 million cap on total outstanding debentures for borrowers participating in SBA 504 Green Energy Program.
- Creditworthiness – SBA aims to refocus in on traditional credit factors like cash flow, equity and business viability to promote responsible lending practices and reduce risk.
SBA 504 Refinance Program Updates
- Existing debt must now be current for 12 months (previously 6 months).
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- If the debt is younger than 12 months, it must be current for its full term to be eligible for SBA 504 Refinance Loan (SBA may issue further technical guidance on this requirement).
View Full Release on SBA website
*All SBA 504 information subject to full pending SBA implementation guidance – required regulations, notices, and revised forms. The regulations surrounding a CDC’s ability to implement the new changes are still being finalized. The SBA is expected to provide more information as soon as it is available.