SBA 504 Program Updates Effective in FY2027
The U.S. Small Business Administration (SBA) published guidance for the 504 loan program in SOP 50 10 8.1. Effective October 1, 2026, these updates reflect the agency’s emphasis on strong underwriting and structuring deals that best align with the needs of the borrower. These updates are in addition to the previously announced FY27 fee waivers.
Below are some of the key program updates. As your bridge to the SBA, please reach out to a member of the SomerCor team with any questions.
New CDC Credit Underwriting Requirements
FINANCIAL REPORTING
CDCs must analyze the highest level of financial reporting available, in the following order:
• CPA audited statements
• CPA reviewed statements
• CPA compiled statements
• Business tax returns CDCs must review business tax returns for eligibility
CREDIT STANDARDS
• Minimum Debt Service Coverage Ratio (DSCR) increased from 1:1 to 1.15:1
• DSCR is defined as EBITDA divided by combined debt service post 504 transaction
Enhanced Third Party Lender Analysis Requirements
For 504 projects with a total project cost of $5 million or more, the SBA requires either the Third Party Lender (TPL)’s credit memo or underwriting analysis to be reviewed as part of the Agency’s approval process. The TPL memo and analysis does not need to include sections on additional products, services, or risk ratings
The SBA has established two ways for the TPL to submit this information:
• Through their CDC partner – the TPL can provide this information to the CDC, who will include this in the loan package prior to submission to the SBA.
• Directly to the SBA – the TPL can submit the credit memo or underwriting analysis via the SBA’s designated Box.com submission portal.
Expanded Eligible Energy Project Financing
The SBA eliminated the $16.5 million aggregate cap on outstanding Eligible Energy Public Policy Projects:
•Maximum debenture remains $5.5 million per qualifying project
•Applies to projects demonstrating a 10% reduction of energy consumption or the generation of at least 15% renewable energy.
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