The Small Business Administration is changing the rules mid-game, without notice, and applying those changes to deals that are already on the books.

The underhandedness is about who counts in the 7(a) program, which backstops about 70,000 loans a year with about $100 billion worth currently outstanding. In the past, only the borrower who signed the personal guarantee was barred from future SBA and other government-backed loans if a deal went bad. Now lenders say that rule is being applied to everyone involved in owning the business, including passive investors with minority interests. That means if you put any money into an SBA-backed deal and it fails, you may be shut out of future government-backed loans just as if you were the one signing on the dotted line.

That risk was not part of the original agreement.

No one is entirely sure if this is a policy change or something else. Investors and lenders say deals are being flagged in the SBA’s system, but the agency has not issued guidance explaining why. That has left people guessing. Some think it could be a glitch. Others believe it is intentional, part of an effort to stop funds–as in private equity funds– and other outside investors from using government-backed loans with longer repayment periods and smaller down payments to boost their returns.

The SBA didn’t respond to requests for comment.

The 7(a) program is the main way people finance small business acquisitions. A bank makes the loan, and the buyer usually puts down about 10%. The SBA then guarantees a large share of that loan, often around 75%, which means if the borrower cannot repay, the government covers that portion for the bank. That guarantee is what makes these loans possible. The repayment terms are long enough for buyers to use the cash flow from the business to pay down the debt over time. In some cases this amounts to as much as 10 years. Though the average SBA 7(a) loan is only about $500,000, the SBA program is large. In fiscal 2025 ending........

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