SBA SOP 50 10 8, A.Ch3.C.2 — Responsibilities When the Borrower is Leasing Space
Verbatim text of SBA SOP 50 10 8 section A.Ch3.C.2 (Responsibilities When the Borrower is Leasing Space), effective 2025-06-01. 2 provision(s) quoted from the SOP PDF. SBA's own document page serves superseded editions, and the SOP is further amended by policy notices — read this with the notices that touch it.
SBA lending corpus: SOP 50 10 and the active notices, with the expiry watcher.
Verbatim regulatory text
Verbatim provisions from SBA SOP 50 10 8, A.Ch3.C.2 — Responsibilities When the Borrower is Leasing Space — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
SOP 50 10 8 A.Ch3.C.2
2. Responsibilities When the Borrower is Leasing Space When the Borrower is operating in leased space and $500,000 or 30% of loan proceeds (whichever is less) will be used for leasehold improvements or when $500,000 or 30% of the proposed collateral (whichever is less) consists of leasehold improvements, fixtures, machinery, or equipment that is attached to leased real estate: i. The SBA Lender must obtain a copy of the written lease between the Borrower and the landlord. For 7(a) loans, the lease term, including renewal options exercisable only by the Borrower, should equal or exceed the term of the loan. For 504 loans, the lease term must equal or exceed the term of the loan. An assignment of lease and Landlord’s waiver should be obtained. ii. If the SBA Lender is unable to obtain the assignment of lease or landlord’s waiver, for both 7(a) and 504 loans, the lease term, including renewal options exercisable only by the Borrower, must equal or exceed the term of the loan. Additionally, the SBA Lender must document in its file its attempt to obtain the assignment and the landlord’s waiver and the reason(s) for not obtaining them. If the loan proceeds will finance improvements on a leasehold interest in land, the underlying ground lease must include, at a minimum, detailed clauses addressing the following: i. Tenant's right to encumber leasehold estate;
SOP 50 10 8 A.Ch3.C.2.ii
ii. No modification or cancellation of lease without SBA Lender's or assignee's approval; iii. SBA Lender's or assignee's right to: a) Acquire the leasehold at foreclosure sale or by assignment and right to reassign the leasehold estate (along with right to exercise any options) by SBA Lender or successors; lessor may not unreasonably withhold, condition, or delay the reassignment; b) Sublease; Section A, Ch. 3: Uses of Proceeds c) Share in hazard insurance proceeds resulting from damage to improvements; d) Share in condemnation proceeds; and e) SBA Lender’s or assignee’s rights upon default of the tenant or termination. If the loan proceeds will finance improvements made by the Borrower/tenant on a space that the Borrower is leasing, and if the landlord will reimburse the Borrower for such tenant improvements, the landlord reimbursement must be used to pay down the loan to a point that will not trigger a subsidy recoupment fee, and any remaining funds may be used for business working capital or to decrease the rent payments. Alternatively, if the Lender can document that the landlord reimbursement has been factored into the Lender’s working capital adequacy analysis, the landlord reimbursement may be used for business working capital or to reduce the rent payments. For loans collateralized by Indian lands held in trust, if the owner of the land cannot get approval for a lien on the property, the SBA Lender may consider requiring an Assignment of Lease. The Assignment of Lease also has to be approved by the Secretary of the Interior or his/her authorized representative.
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