How New SBA Loan Rules are Changing Cash Flow Options — Why Factoring is a Smart Alternative

Starting June 1, 2025, the Small Business Administration (SBA) will enforce major changes to its SBA loan programs. While these updates are intended to promote financial discipline, they will also restrict access to working capital for many small businesses that have previously relied on SBA-backed financing.

What Finance Brokers Need to Know

The key changes include:

• 10% equity injection required for startups and business acquisitions.
• Minimum Small Business Scoring Service (SBSS) score raised from 155 to 165.
• Stricter underwriting verification for cash flow and debt repayment.
• Loans restricted to businesses 100% owned by U.S. citizens or lawful permanent residents.

These updates represent a return to conservative, bank lending standards. As a result, many businesses that once counted on SBA loans will find themselves shut out.

Why Stricter SBA Lending Standards Will Limit Access to Capital

The return of equity injection requirements and higher underwriting hurdles will create barriers for a wide range of businesses. Startups, younger companies, and those recovering from financial setbacks will face increased difficulty securing SBA financing. Even healthy, cash-flow-positive businesses could be turned down if they lack strong historical profitability or fail to meet the new SBSS score requirements.

The bottom line:
Many businesses will need to explore alternative working capital solutions to maintain operations, growth, and competitiveness.

Invoice Factoring – a Flexible Working Capital Solution

Invoice factoring is positioned to become the most practical solution for businesses affected by the new SBA guidelines. Many companies are moving away from SBA Loans and turning to factoring for financing.

Why Factoring Stands Apart:

• Decisions are based on the quality of a company’s receivables.
• Customer creditworthiness matters more than the business owner’s personal credit.
• Funding is tied to completed work or delivered services, not future projections.

Factoring Advantages Under the New SBA Rules:

• No personal credit score minimums.
• No mandatory equity injection.
• No requirement for long-established profitability.
• Funding scales automatically as invoice volume grows.

For companies delivering services and waiting 30 to 90 days (or more) for payment, factoring provides a vital cash flow bridge, without adding debt or locking them into long-term contracts.

How Brokers Can Position Factoring as a Strategic Financial Tool

To differentiate themselves, brokers must present factoring as a proactive solution, not a last resort.

Best Practices for Brokers:

• Position factoring as a cash flow accelerator, not an emergency fix.
• Emphasize it as a strategic liquidity tool for navigating tighter credit markets.
• Highlight its role as a growth enabler, not a fallback option.

Factoring keeps businesses moving forward at a time when traditional financing options are narrowing. Brokers who understand and communicate this will stand out.

Preparing Clients Now: Steps Brokers Should Take Before June 2025

Brokers aiming to serve their clients at the highest level should act now — not after the new SBA standards take effect.

Action Plan:

1. Review your client list and identify businesses likely to be impacted.
2. Start early conversations about flexible working capital options.
3. Educate clients about factoring while there’s still time to plan.
4. Build relationships with factoring providers who can respond quickly when needed.

In a tightening capital market, brokers who offer solutions — not just diagnoses — will earn deeper client loyalty and more long-term business.

Factoring: The Right Solution for 2025 and Beyond

The funding landscape is shifting fast. Invoice factoring can provide the working capital solutions your clients need to remain competitive in 2025 and beyond.

Want to learn how factoring can support your clients?
Contact Scale Funding today and make sure your clients have every available option on the table.

The brokers who adapt early will become the trusted advisors their clients rely on most.

About the Author

Michael Holland
Senior Vice President of Sales | Scale Funding

Michael Holland serves as Senior Vice President of Sales at Scale Funding, a nationwide leader in invoice factoring and alternative financing solutions for over 30 years. With two decades of leadership in sales and finance, Michael specializes in providing flexible invoice factoring solutions for industries including transportation, staffing, telecom, energy, and manufacturing. He brings deep experience helping businesses solve complex cash flow challenges and achieve growth.

Michael takes a straightforward, results-driven approach, guiding commercial finance brokers and clients alike through today’s rapidly changing funding landscape.

Connect with Michael at Scale Funding to discuss how factoring can support your business or clients as SBA lending standards tighten in 2025. Michael. [email protected] or (952) 656-3478