SBA "Prior Loss Rule" for minority owners reversed

Effective June 1, 2026, the SBA is easing the "Prior Loss Rule" for non-controlling minority owners. Under 13 CFR###-###-#### q), if you (or an associate) had ANY ownership in a business that defaulted on an SBA loan and caused a loss to the government, you were ineligible for a 7(a) or 504 loan. That meant a passive investor who owned any ownership (even 1%) of a business that failed, with zero control and zero management role, was permanently locked out of SBA financing. The SBA will now consider a waiver on a case-by-case basis if the owner was a "Non-controlling Minority Equity Investor." To qualify, that owner must have: 1. Held less than 20% equity in the business with the prior loss 2. NOT been a guarantor or co-borrower on the defaulted loan 3. Had no control over the business that defaulted If those thresholds are met, the SBA evaluates the full circumstances through its Fraud Risk Framework, looking at the number of prior defaults, timing, and how much the investor actually had at stake. A few important limits: 1. Does NOT apply to PPP or COVID EIDL losses 2. Does NOT apply to defaults on non-SBA federal loans 3. You're still ineligible if you have delinquent federal nontax debt (90+ days past due) Why this matters: A bad outcome on a minority investment shouldn't follow an entrepreneur for life. This is a smart, common-sense fix that restores access to capital for responsible buyers who were unfairly caught by a blanket rule. If you've ever been told you're ineligible because of a prior SBA loss on a business you didn't control, we would love to help. We work with 50+ active SBA lenders and stay on top of every policy update so our borrowers don't get left behind. The bank pays us after your loan closes, so it's a 100% free service for borrowers. Questions on whether this waiver could apply to you or just looking to find the best SBA lender for your deal? Reach out here or use this meeting link to schedule a meeting with us: https://cal.com/team/sba/searchfunder Full notice here: https://www.sba.gov/sites/default/files/###-###-#### /Prior%20Loss%20Rule%20-%20Non-Controlling%20Ownership%20Update%###-###-#### pdf