The Small Business Administration has announced a significant update that will impact how certain SBA loans are evaluated beginning in 2026. Effective March 1, 2026, the SBA will discontinue the use of the FICO Small Business Scoring Service score for the SBA 7(a) Small Loan.
This change applies to 7(a) loans under $350,000 and represents a shift toward a more traditional, judgment-based underwriting approach. For lenders, advisors, and small business owners, this update places greater emphasis on financial fundamentals rather than automated credit scoring.
The SBA’s Primary Guidance
The SBA has stated that once the FICO Small Business Scoring Service score is discontinued, 7(a) Small Loans under $350,000 will be underwritten using the same comprehensive, judgment-based standards applied to traditional commercial credit.
Under this framework, lenders will evaluate loan applications based on:
- Complete credit history and credit patterns
- Cash flow and debt service coverage, with a minimum requirement of 1.1 to 1
- Insurance, collateral, and working capital considerations
- Documentation demonstrating the availability or lack of credit elsewhere
This guidance serves as the foundation for the updated underwriting process and defines how lenders will assess eligibility and risk moving forward.
What Is Changing
Previously, the FICO Small Business Scoring Service score played a key role in screening SBA 7(a) Small Loans. While lenders still performed full underwriting, the score acted as an initial benchmark.
Beginning March 1, 2026, lenders will no longer rely on this scoring requirement. Instead, loan decisions will be based on a full financial and credit review, similar to conventional commercial lending. This allows lenders to apply professional judgment and evaluate the overall strength of a business rather than relying on a single numerical score.
Key Factors Lenders Will Evaluate
With the removal of the FICO Small Business Scoring Service score, lenders will rely on a more comprehensive review of the borrower’s financial position. This approach mirrors traditional commercial credit underwriting and focuses on the overall ability of the business to repay the loan.
Lenders will evaluate the following:
- Complete credit history and patterns, including both business and personal credit performance, payment behavior, and long-term trends rather than a single numerical score.
- Cash flow and debt service coverage, with a minimum required debt service coverage ratio of 1.1 to 1, demonstrate that the business generates sufficient cash flow to meet its loan obligations.
- Insurance, collateral, and working capital considerations, ensuring appropriate risk protection, reasonable collateral support when applicable, and adequate liquidity to sustain operations.
- We document credit availability. This confirms that the borrower cannot obtain similar financing on reasonable terms through conventional credit sources, as required under SBA guidelines.
What This Means for Small Business Borrowers
This change does not eliminate underwriting standards. Instead, it shifts the focus toward a more complete evaluation of the business.
Borrowers with strong cash flow, organized financial records, and consistent credit management may benefit from a more flexible review process. At the same time, preparation becomes increasingly important. Accurate financial statements, tax returns, bank records, and cash flow projections will play a critical role in loan approval.
What This Means for Lenders and Advisors
For lenders and financial advisors, the removal of the FICO Small Business Scoring Service score increases responsibility in credit decision-making. Underwriting expertise, documentation quality, and sound risk assessment will be essential to maintaining compliance while supporting responsible lending.
This change also aligns SBA Small Loans more closely with traditional commercial credit practices, reinforcing a fundamentals-driven approach to lending.
How Scout Financial Supports the Transition
Here’s how we support borrowers under the updated framework:
- Build lender-ready documentation
We assemble and organize a complete, lender-ready package. It includes financial statements, tax returns, debt schedules, bank statements, and required SBA forms to help underwriting move efficiently.
- Underwrite to repayment, not just eligibility
Scout focuses on true repayment capacity. We analyze and normalize cash flow where appropriate. We quantify debt service coverage and pressure-test assumptions to ensure the loan request is properly sized and defensible.
- Create a clear credit narrative
We connect the dots between the business model, historical performance, use of funds, assumptions, and the “why now.” This includes addressing the SBA’s credit-elsewhere requirement in a practical, well-supported manner.
- Align the request with lender expectations
Different lenders operate within different credit parameters. Scout helps match the borrower’s profile and file strength with the right lending partners, reducing friction, delays, and wasted cycles.
What This Change Signals for the Future of SBA Lending
The SBA’s decision to discontinue the FICO Small Business Scoring Service score for SBA 7(a) Small Loan under $350,000 reflects a broader shift toward comprehensive credit evaluation. Beginning March 1, 2026, loan decisions will rely on credit history, cash flow strength, collateral considerations, and thorough documentation rather than automated scoring alone.
For borrowers and lenders alike, this reinforces a fundamental principle of SBA lending. Strong financial foundations and well-prepared credit packages remain the key to long-term success.
Out of the financial maze—Into clarity. If you are preparing for an SBA 7(a) Small Loan or adjusting to the updated underwriting standards, Scout Financial helps simplify the path forward. With a coordinated approach and a team aligned around your goals, we help you move forward with confidence and stay there.
