As previously announced by SBA, effective March 1, 2026, the agency is discontinuing use of the FICO® Small Business Scoring ServiceSM Score (SBSS Score) for 7(a) Small Loans.  Also as previously indicated, the sunsetting of this credit evaluation tool necessitates an update to the underwriting requirements for these loans.

The new underwriting requirements are included in a second SBA notice on this topic, Procedural Notice 5000-876777,  Sunset of SBSS Score for 7(a) Small Loans – Supplemental Guidance  (dated February 20, 2026).  The new requirements replace the SOP amendments that were included in the original notice, Procedural Notice 5000-875701, Sunset of SBSS Score for 7(a) Smal Loans (dated January 16, 2026).  The revised requirements contained in the second notice will apply to all 7(a) Small Loans receiving SBA loan numbers on or after March 1, 2026.  They do not affect SBA Express loans. 

Per the new notice:  “SBA is updating the 7(a) Small Loan underwriting procedures in SOP 50 10 8 to emphasize generally accepted industry credit analysis processes and procedures and to include supplemental guidance [as provided in the Notice].”  The new guidance requires lenders to summarize the operating business, ownership, and loan request, and to state why credit is not available elsewhere.  It also requires lenders to specifically address other critical issues involved in determining creditworthiness, including:

  • Credit history.
  • Repayment ability.
  • Insurance.
  • Other loan-specific issues, including –
    • Collateral;
    • For loans greater than $50,000 when more than 50% of the loan proceeds will be used for working capital, the need for this level of working capital;
    • The terms of any seller financing and standby agreements;
    • Any liens, judgments or pending litigation (including divorce proceedings);
    • Franchise-related considerations;
    • Justification for any debt refinancing; and,
    • The effect any affiliates may have on repayment ability.

The analysis of credit history must include the applicant (and any operating company), and the applicant’s associates and guarantors.  In performing this analysis, a lender may use the same credit scoring model that it uses for its similar conventional loans as long as the model is permitted by the lender’s primary Federal regulator and does not rely solely on consumer credit scores.  Small Business Lending Companies also may use their own scoring models, but such models may be subject to periodic review by SBA.

For purposes of determining repayment ability, lenders are required to analyze:

  1. The applicant’s (and any operating company’s) debt service coverage. 
  2. To confirm the commercial debts and obligations considered in the debt service coverage calculations, two most recent months of commercial bank activity or statements for the primary operating account.  [Excluded from this requirement are for businesses that are not currently in operation and have no commercial debts or obligations, and complete change of ownership transactions when there will be no other debts or obligations except the 7(a) loan.]
  3. Projected earnings and assumptions, as applicable. 

The applicant’s debt servicing coverage ratio (DSCR) must be equal to or greater than 1.10:1 on either a historical or projected basis as calculated by one of the processes set forth in the notice.  If the applicant does not meet or exceed the required DSCR, the loan must be processed either as a Standard 7(a) loan, or, if the lender has SBA Express authority, as an SBA Express loan. 

Please read the notice in its entirety for complete details on the changed requirements.  And please send any questions or comments on the upcoming changes to naggl.org/asknaggl so that we may continue to share your feedback with SBA.   Finally, watch for information from NAGGL regarding upcoming training on the new 7(a) Small Loan underwriting requirements.