SBA Eliminates Past-Era Underwriting Standards to Restore Financial Integrity

Effective June 1, 2025, the U.S. Small Business Administration (SBA) has adopted SOP 50 10 8, a sweeping reform that eliminates the controversial “Do What You Do” (DWYD) underwriting policy and reinstates time-tested standards to improve loan program integrity.

This move aims to stabilize SBA’s $40+ billion loan portfolio and restore borrower and lender trust in federally backed loans.

SBA Eliminates Past-Era Underwriting Standards to Restore Financial Integrity

🧾 Why the Shift? Financial Safeguards Over Flexibility

The DWYD policy—launched in 2023—allowed lenders to use their own underwriting criteria. While intended to accelerate approvals, it increased inconsistencies and loan defaults, leading to a $397 million shortfall in FY2024, the first deficit in over a decade.

In response, SOP 50 10 8 marks a return to uniform standards, tighter risk controls, and taxpayer protection.

🔗 SBA Announcement: SOP 50 10 8 Reform

🧠 Key SOP 50 10 8 Updates at a Glance

1. ❌ DWYD Eliminated

All SBA lenders must use SBA-mandated credit analysis standards
No more internal policy-based discretion

Impact: Consistent borrower evaluations and transparent expectations.

2. 📊 SBSS Score Increased to 165

Applies to 7(a) loans ≤ $500,000
Below-threshold applicants require full documentation and review

3. 💰 10% Equity Injection Required

Mandatory for startups and business acquisitions
Seller financing counts only if on full standby and ≤50% of total injection

🔗 Whiteford Law: SBA Equity Changes Explained

4. 🛂 Ownership Rules Strengthened

100% ownership must be by U.S. citizens, nationals, or LPRs
Foreign-owned businesses are ineligible

5. 📒 Franchise Directory Reinstated

Eligibility must now be verified via SBA’s Franchise Directory

6. 🧾 Additional Verification Requirements

IRS tax transcript matching
Hazard insurance for loans > $50K
Life insurance if borrower is key to operations

🔗 Starfield & Smith: SOP 50 10 8 Best Practices

📊 What Borrowers Should Expect

✅ Pros:

Clear, consistent loan standards across lenders
Improved loan quality and program sustainability
Fewer surprises in underwriting

❗ Cons:

Higher credit standards and documentation demands
Mandatory cash or standby-equity contribution
Ineligibility for businesses with any foreign ownership

Borrower Tip: Work with an SBA-preferred lender to navigate new requirements.

🏦 What It Means for SBA Lenders

✔️ Standardization

All SBA lenders must now follow the same underwriting SOPs. No more hybrid or discretionary criteria.

✔️ Better Portfolio Performance

Stronger equity and credit filters reduce defaults and delinquency risk.

✔️ System & Staff Overhaul

Banks must update origination software, train underwriters, and reassess in-progress loans for compliance.

💡 Actionable Tips to Navigate SOP 50 10 8

For Borrowers:

✅ Check your SBSS score with your lender
✅ Clean up credit reports and resolve errors
✅ Ensure 100% U.S. ownership structure
✅ Document 10% equity injection before applying

For Lenders:

✅ Train loan officers on SOP 50 10 8 updates
✅ Audit current pipelines for eligibility risks
✅ Update all borrower checklists and franchise vetting processes

✅ Conclusion

The SBA’s adoption of SOP 50 10 8 officially ends the DWYD era and reestablishes consistency, transparency, and financial integrity in small business lending. For borrowers, this means more preparation—but also clearer expectations and greater stability.

Lenders now operate under a unified standard that strengthens SBA’s guarantee fund and reaffirms its mission to support America’s most promising small businesses.

🚀 Take the Next Step with BoomerBiz Loans

Ready to grow with confidence under the new SBA rules? BoomerBiz Loans specializes in supporting baby boomer business acquisitions and SBA funding up to $10 million. Our 3-step application process delivers fast approvals—often within 24–48 hours.

With our expertise in SOP 50 10 8 compliance, we help you navigate documentation, credit standards, and eligibility with ease.

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📚 Bonus Reads: Master SBA Lending in 2025

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