SBA Extends Multiple Notices and Updates 7(a)/504 Procedures

Overview#

The SBA has issued Procedural Notice 5000-862692, a comprehensive update that extends multiple existing notices, rescinds one notice, and implements important substantive changes to 7(a) and 504 loan procedures.

Key Changes#

Notice Extensions (Two Years)#

Seven procedural notices have been extended for an additional two years or until the next SOP update. Extended notices cover:

• Borrowers in leased space requirements
• 7(a) equity requirements for complete buyouts
• 7(a) equity requirements for partial change of ownership
• 7(a) loans to refinance same institution debt
• Loan maturity for 7(a) change of ownership loans
• Other operational procedures

Notice Rescission#

PN 5000-851789 has been rescinded, except for some formatting corrections to SOP 50 10 7.1.

Substantive Changes (Effective Immediately)#

1. Business Valuation Flexibility#

When financing a change of ownership with a Small 7(a) or Express loan, the business valuation requirement has changed to "do what you do" - meaning lenders follow their own policies used for similarly-sized non-SBA commercial loans. The valuation method must still be prepared in a commercially reasonable and prudent manner.

Impact for Buyers: This may reduce documentation requirements for smaller acquisition loans, as lenders have more flexibility in their valuation approach.

2. Single Construction Estimate Option#

Lenders may now rely on a single estimate from:

• A third-party construction management firm, OR
• The lender's existing internal construction management department

Previously, two unaffiliated contractor bids were required.

Impact for Buyers: Construction and renovation projects may move faster with only one estimate required.

3. C-PACE Financing Clarification#

The notice clarifies that both 7(a) and 504 loans can be used with Commercial Property Assessed Clean Energy (C-PACE) financing.

Impact for Buyers: Green building improvements and energy efficiency projects have clearer SBA financing pathways.

Who This Affects#

• SBA Lenders: Updated procedures for valuations, construction, and C-PACE
• Business Buyers: Potential for faster acquisition loan processing
• Property Buyers: Clarity on combining SBA loans with C-PACE financing

What Buyers Should Know#

1. Faster Valuations: Small 7(a) and Express acquisitions may have simplified valuation requirements
2. Construction Projects: Single estimate can speed up renovation loan processing
3. Energy Improvements: C-PACE financing now explicitly compatible with SBA loans

Effective Date#

This notice became effective December 6, 2024.

Official Source#

Review the complete procedural notice on the SBA website.