Prior Loss Rule: Non-Controlling Ownership Update
On May 28, 2026theSBA published SBA Policy Notice 5000-879464,”Prior Loss Rule: Non-Controlling Ownership Update” effective June 1, 2026. Click here to access the SBA Policy Notice on the SBA website.
As more fully described in the Policy Notice, SBA has determined there is good cause to use its waiver authority under 13 CFR 120.110(q) to ease the restrictions against a responsible Applicant whose owners held certain interests in a business which defaulted on an Agency loan and resulted in a loss to the government. To be considered for this waiver, the aforementioned owner of the current Applicant must have: (i) held less than 20 percent of the equity of the business with the prior loss; (ii)was not a guarantor or co-borrower on the defaulted SBA loan to that business; and (iii)did not have any control over the business with the prior loss. Once these threshold criteria are met, SBA will evaluate the full circumstances surrounding the prior loss on a case-by-case basis, at the time of Application through the Fraud Risk Framework, using its discretion to determine whether granting the waiver is consistent with the purposes of the 7(a) and 504 programs.