Starting June 1, 2025, the Small Business Administration (SBA) is updating its eligibility requirements that affect how franchise and small business loans are evaluated and approved. While these aren’t exactly new rules, many simply represent reinstatements and revisions to previous lending practices. If you’re exploring franchise ownership or business funding, here’s what you need to know—broken down in plain English.
The SBA Franchise Directory is Back
If you’re buying into a franchise brand listed in the SBA Franchise Directory, good news: your loan could get approved faster. Lenders can skip a full Franchise Disclosure Document (FDD) review for these brands. This is a win for both speed and efficiency—but only if your brand is listed.
SBA Loan Guarantee Fees Are Returning
These fees were waived during the previous administration but are now back. The SBA isn’t taxpayer-funded, so these fees help keep the program running. Don’t worry—it’s common for this fee to be rolled into the total loan amount.
Loans Over $50,000? Collateral Will Be Required
If you’re applying for more than $50K, be prepared to put up collateral. That could include:
- Personal real estate
- Investment property
- Business assets
Transferring property to someone else within six months of applying? It still counts as your collateral.
Working Capital Must Be Justified
Gone are the days of vague “just-in-case” funding. Now, you need to clearly outline where every dollar of working capital will go—and why.
Expect More Scrutiny on Business Plans
Your business plan isn’t just a formality—it’s a deal-breaker or deal-maker. Lenders require:
- A clear narrative of your business model
- Financial projections with detailed assumptions
- Demonstrated ability to service the loan
Say Goodbye to the “Do What You Do” Era
One insider put it this way: “No more ‘do what you do’ banks—only do what we say you can do.” These updated revisions are with intention to restore integrity and fiscal sustainability of government backed loan programs.
Credit Elsewhere Test Is Back
If you own 20% or more of a business and already have access to sufficient personal funds, a lender will likely pass on your application. They’re essentially saying: if you don’t need the loan, don’t expect to get one.
U.S. Ownership Is Mandatory
All businesses seeking SBA funding must now be 100% owned by:
- U.S. citizens
- U.S. nationals
- Permanent residents (green card holders)
If any part of the business is owned by someone outside of these categories, the loan application will not be accepted.
Legal Fees Must Be Local
If you’re including legal fees as part of your injection, they must come from a law firm located in the same state as your business.
Lenders May Use All Available Collateral
If you currently own a business, lenders may also count on assets held in that business, in addition to any personal real estate, such as your:
- Business receivables
- Inventory from other owned businesses
The Bottom Line: These changes aren’t about making it harder to get a loan—they’re about making it clearer and more consistent. For serious entrepreneurs, especially those exploring franchise ownership, understanding these updates can help you prepare smarter and move faster.
Have questions or want to explore your funding options? Let’s talk.
Reach out to the team at Benetrends to learn how we can help you navigate these updates and fund the business of your dreams. www.benetrends.com
** Benetrends Financial is a privately owned company and is not affiliated with, endorsed by, or acting on behalf of the U.S. Small Business Administration (SBA). We are not an agency of the federal government and do not represent the SBA in any capacity.