Can a minority investor get a waiver of the prior loss rule?
Short answer
Yes, case by case. Since June 1, 2026, SBA may waive the rule for an owner who held less than 20% of the failed business. The owner cannot have been a guarantor or co-borrower, or had control. Source: SBA Policy Notice 5000-879464.
Yes, on a case-by-case basis. SBA Policy Notice 5000-879464, effective June 1, 2026, uses the waiver authority in 13 CFR § 120.110(q). SOP 50 10 8.1, Sec. A, Ch. 1, Para. E carries it forward.
The three threshold tests
The owner of your business must have:
- Held less than 20% of the equity of the business with the prior loss.
- Not been a guarantor or co-borrower on the defaulted 7(a) or 504 loan.
- Had no control over the business with the prior loss.
What SBA weighs next
Meeting those tests only gets the request considered. SBA then looks at:
- The prior 7(a) or 504 loans involving the investor.
- The number and percentage of defaulted SBA loans involving the investor.
- When the defaults happened, including whether one was an early default.
- The investor's capital investment compared with total SBA loan amounts.
What the waiver does not cover
It applies only to prior losses on SBA 7(a) and 504 loans. It does not cover non-SBA federal loans, other federally assisted financing, Paycheck Protection Program (PPP) loans, SBA Economic Injury Disaster Loan (EIDL) or COVID-19 EIDL loans.
Delinquent debt is separate
An applicant or guarantor, other than a supplemental guarantor, remains ineligible while holding a delinquent nontax federal debt.
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