SBA raises equity floor for business acquisition loans starting Oct. 1

Buyers using SBA 7(a) loans to acquire a whole business will face a new 10% minimum equity injection starting Oct. 1, with tighter rules on where that cash can come from. Regalis Capital says buyers who planned to fund less should rebuild deal models now because the change applies to loans assigned an SBA number on or after that date.

Why it matters: - The SBA rule change raises the cash buyers must bring to an acquisition and limits how much of that equity can be covered by seller financing, minority investors, or other non-cash sources. - Buyers who built deals around a smaller down payment may need to resize the purchase, renegotiate terms, or raise additional capital before closing. - The shift affects how acquisition deals pencil out under SBA financing, especially for buyers relying on outside investors or flexible seller notes.

What happened: - Starting Oct. 1, a buyer using an SBA 7(a) loan to buy a whole business must inject at least 10% equity into the deal. - The new floor applies to any loan issued an SBA loan number on or after Oct. 1. - Regalis Capital said buyers planning to put in less than 10% should rebuild their numbers now. - Regalis Capital described itself as a done-for-you business acquisition service.

The details: - The rule comes from SOP 50 10 8.1, the SBA's rewritten loan operating procedure, announced in SBA Information Notice 5000-880695. - Change-of-ownership rules now sit in a new Appendix 15. - For a complete change of ownership, the minimum equity injection is 10%, and the procedure says that amount cannot be reduced or eliminated. - The SBA split allowed sources of the equity injection into two lists. - The unlimited list includes unborrowed cash, a personal loan to a guarantor that is repaid outside business cash flow, and qualifying grants. - The limited list includes standby debt, seller debt on full standby and subordinated, and non-controlling minority equity. - A non-controlling minority investor is defined as holding under 20%, having no control, and taking no distributions except taxes until the loan is paid off. - Items on the limited list can cover no more than half of the required equity injection. - On a $2 million purchase, the required injection is $200,000. - At most $100,000 of that amount can come from a standby seller note or a qualifying minority investor. - The party providing standby debt may not also take an equity stake in the same deal. - Regalis Capital said those figures are illustrative arithmetic based on the SBA requirements described above as of Aug. 25, 2026, and are not an offer of credit or a commitment to lend. - Regalis Capital said actual terms are set by the lender and vary by borrower and deal. - The same SBA document sets debt service coverage floors of 1.25 to 1 for a complete change of ownership and 1.15 to 1 for a business expansion. - SBA 7(a) Small loans can no longer be used for a change of ownership. - That change pushes smaller acquisitions into the standard 7(a) process.

Between the lines: - The new framework makes cash equity more important in SBA-backed acquisitions and reduces the room to structure deals around investor capital that behaves like equity but is not full cash at closing. - The hard coverage floors also suggest tighter underwriting and less flexibility in how much debt a buyer can layer onto a purchase. - Regalis Capital is positioning the rule as a deadline-driven planning problem, not just a compliance update. - “The buyers who get hurt here are the ones who built a plan around an outside investor covering most of the cash. That door closes on October 1,” the Regalis Capital team said. - “If you start now, you have time to raise the cash, restructure the seller note, or look at a slightly smaller business. If you wait until September 30, you are negotiating against a deadline,” the team said.

What's next: - Buyers can run scenarios using the free Regalis Capital Deal Value Calculator at dealvaluecalc.regaliscapital.com. - The calculator is open to anyone, takes a few minutes, and does not require signup. - Buyers and advisers are likely to rework equity plans, seller note terms, and target deal sizes before the Oct. 1 effective date.

The bottom line: - SBA acquisition loans are getting stricter on both cash injection and deal structure, and buyers with sub-10% equity plans have a limited window to adjust.