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๐จ The NEW Changes To Small Business Lending (SBA Update - Emergency Pod!)
Apr 28, 2025
Discover the latest shifts in SBA lending, as new policies are set to tighten qualifications amid mounting defaults. Learn about the crucial changes, including higher down payment requirements and the push for personal guarantees. Dive into 'phantom equity'โa fresh financing approach that's shaking things up. Whether you're eyeing commercial real estate or small business investments, this conversation equips you with insight to navigate the evolving landscape and potentially quit your job in the next 6-18 months!
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Quick takeaways
- The SBA's tightening of 7A loan underwriting processes, including lower maximum loan sizes and increased cash contributions, aims to restore stability.
- New requirements mandate full ownership verification for borrowers, emphasizing due diligence and responsible borrowing practices to reduce defaults.
Deep dives
SBA Underwriting Changes
The Small Business Administration (SBA) is significantly tightening its underwriting processes for the 7A loan program, which is integral for small business acquisition. This change stems from rising default rates attributed to prior relaxed criteria under the Biden administration, which compromised the program's stability. Notable adjustments include a reduction in the maximum loan size from $500,000 to $350,000 and a new requirement for borrowers to contribute 10% of the purchase price in cash at closing, without using seller notes to meet this obligation. These rigorous standards aim to restore prudent lending practices and ensure the program's sustainability against defaults.
