Welcome to Episode 2 of the SBA Cafe! In this episode, host Ryan sits down with top SBA 7A and 504 lenders—Kalen, Julian, and Casey—to unpack the massive new SBA rule change and share insider strategies for getting your loan approved during tax season.

If you are an entrepreneur, business owner, or looking to acquire a business, this is a must-watch episode to ensure your loan doesn't fall through at the finish line.

In this episode, we cover:

- Navigating Tax Season: How lenders evaluate your loan application before your 2025 tax returns are officially filed.
- The Power of the Draft: Why your company-prepared P&L and balance sheets must perfectly align with the draft tax returns submitted to the IRS.
- Deal Killers: Real horror stories of sellers tweaking their numbers at the last minute to mitigate taxes, and how it instantly kills the buyer's loan.
- The LPR Rule Change (Effective March 1st): A deep dive into the abrupt new SBA mandate stating that Legal Permanent Residents (Green Card holders) can no longer hold ownership in businesses applying for new SBA loans.
- Ripple Effects: How the 100% U.S. citizen ownership rule is shrinking buyer pools, complicating cap tables, and disrupting franchise expansions and foreign entity ownership.
- Compliance Warnings: Why our lender panel strongly cautions against using "side deals" or sketchy workarounds to bypass the new LPR guidelines.

Disclaimer: The information provided in this podcast is for educational purposes only. Always consult with your CPA, attorney, or dedicated SBA lender well in advance of acquiring a business or commercial real estate.

If you found this episode helpful, please Like, Subscribe, and Share it with a fellow business owner!

Key Chapters:

0:00 - Introduction and Episode Overview
1:17 - Applying for SBA Loans Before Tax Returns are Due
2:23 - How to Position Your Loan Application for Success
6:11 - Tax Returns vs. Company Prepared Financials (504 Perspective)
10:03 - Managing Draft Tax Returns and Historical Performance
11:15 - Understanding the Schedule M-1 (Accrual vs. Cash Tax Returns)
14:18 - The Importance of Trust Between Buyers, Sellers, and Lenders
16:16 - SBA Loan Horror Stories: Sellers Changing the Numbers
21:01 - Crucial Advice for Buyers During Tax Season
23:58 - The Major SBA Rule Change: LPRs (Green Card Holders) Now Ineligible
27:14 - How the LPR Ban Affects 504 Loans and Foreign Entity Ownership
29:20 - Why Did the SBA Make This Abrupt Policy Change?

Welcome to the inaugural episode of the SBA Cafe podcast. Host Ryan Smith is joined by industry experts Kalen Foster (Live Oak Bank), Julian Carney-Domm (The Bancorp), and Casey Hopkins (Southland EDC) to dive deep into the world of SBA borrowing, market trends, and real-world deal-making.

2025: The Year of Perseverance and Acquisition

The panel kicked off the first episode by reflecting on the landscape of 2025:

• The Year of Perseverance: Kalen Foster noted that despite political shifts and interest rate volatility, successful business owners persevered to grow their operations.
• The Year of Business Acquisitions: Both Julian Carney-Domm and Ryan Smith saw 2025 as a major year for acquisitions, particularly in the startup franchise space.
• "Survive in '25": Casey Hopkins highlighted that while many focused on survival, the 504 loan volume was surprisingly strong compared to 2024.

Lessons from the Trenches: Proud Deal Stories

The experts shared complex stories from 2025 that illustrate the challenges—and rewards—of the SBA process:

• The Long Game: Julian shared a story of a gas station construction project that took a full year to close due to losing a general contractor, discovering underground rock, and facing months of municipal permitting delays.
• Mission-Driven Lending: Kalen recalled a deal involving a 60-year-old family business. Despite pressure from brokers to level the building for high-density housing, the SBA loan allowed the owners to keep their staff employed and maintain their community presence.
• Environmental Obstacles: Casey navigated a 12-month acquisition of a former Oscar Mayer plant, which required extensive environmental remediation and database corrections before the deal could successfully close.
• Detangling Complexity: Ryan discussed a two-year acquisition that nearly fell apart when a seller hesitated and a business partner decided to exit the deal after approval. The transaction eventually closed, and the expansion is now outpacing the original business.

Market Headwinds: Tariffs and Interest Rates

As we move into 2026, several factors are shaping the lending environment:

• The Impact of Tariffs: Tariffs have significantly affected breweries and blue-collar industries, often leading to panic-buying of inventory or increased production costs that do not always justify reshoring operations.
• Interest Rate Shifts: After years of record highs, rates are beginning to decline. The January 2026 504 rate recently published at 5.85%, which experts believe will simplify deal structures and improve cash flow for borrowers.

Best Practices for SBA Borrowers

To help borrowers succeed in 2026, the panel offered several "best practice" tips:

• Take One "Bride" Down the Aisle: Julian warned borrowers against working with multiple lenders simultaneously, noting that it deters the deal team from putting in the necessary effort.
• Prioritize Profitability Over Tax Mitigation: Ryan and Kalen reminded owners that while mitigating taxes is common, you must show a financeable profit picture if you plan to apply for a loan.
• The 5 Ps: Casey emphasized "Prior Planning Prevents Poor Performance," urging borrowers to speak with loan experts well before they begin a transaction.
• Be Ready for Scrutiny: Borrowers should expect their financial statements to be heavily scrutinized and must be prepared with data to explain any downward trends.

Stay tuned for our next episode, where we will perform a deep dive into structuring your financials for a successful 2026 loan application.