# 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.

Canonical page: https://www.sbaexpress.loans/answers/can-a-minority-investor-get-a-prior-loss-waiver/
Last checked: 2026-11-08

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.

## Sources

- [SBA Policy Notice 5000-879464 (effective June 1, 2026)](https://legacy.sba.gov/document/policy-notice-5000-879464-prior-loss-rule-non-controlling-ownership-update)
- [13 CFR § 120.110(q)](https://www.ecfr.gov/current/title-13/section-120.110)
- [SOP 50 10 8.1, Sec. A, Ch. 1, Para. E, Prior Loss to the Government (about p. 25)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)