Buyers, builders, borrowers – whatever the answer, SBA loans are on the rise.
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Small Business Administration-backed lending is off to a near-record start in 2025.
The SBA approved $8.8 billion in 7(a) loans during the first quarter of the federal fiscal year (which began Oct. 1), making it the second-fastest start since 1991, when the agency began tracking data . The number is up 38% from the first quarter of 2024. The last time the program saw such a strong start was 2011, after the Small Business Jobs Act of 2010, which raised from $2 million to $5 million dollars limit the amount an individual business owner can borrow.
The 7(a) program has long been a favorite among business buyers. Founded in 1953, it allows borrowers to secure loans of up to $5 million, with favorable terms that include low payments and extended repayment schedules. The loans are particularly popular for financing acquisitions of existing businesses, thanks to their government-backed guarantees that reduce risk for lenders.
Mark Edler, founder of Builders.CPA, an accounting firm that caters to small business buyers, says there are several reasons for the increase in SBA loan volume.
“There’s a constant flow of people who are really looking to buy a business because they’re looking to change their life and their lifestyle,” he says. And, unlike large corporations, where M&A activity waxes and wanes with interest rates, aspiring entrepreneurs who buy businesses don’t let high rates get in the way of their plans.
Edler also points to recent SBA rule changes that have made the deal easier. In May 2023, the SBA began allowing borrowers to take out multiple 7(a) loans, providing nearly unlimited funding as long as the purchases are in different industries. A December 2024 update went further, allowing buyers to use agency-backed loans while providing the seller with equity in the new business — an option previously prohibited.
Stephen Speer, founder of ECommerce Lending, an online business acquisition advisor, sees more tailwinds driving the market. Among them, Baby Boomers are providing a steady supply of established and profitable small businesses for sale as they look to exit and retire. Many of these decades-old businesses have rightfully earned the trust of shoppers by proving their resilience during the COVID-19 epidemic.
Add it all up, and Speer says the SBA’s “record pace of business acquisitions is likely to continue through 2025.”
But Jerry Freedman, a principal at Freedom Business Financing, believes the buyouts aren’t driving the boom. His analysis of SBA data and talks with lenders lead him to believe that most of the volume is for small loans and SBA Express lines of credit. The SBA’s Small Loan and Express Line of Credit programs are subsets of the 7(a) loan program, designed to provide faster and more accessible financing. Small loans offer financing up to $500,000, while Express Lines offer quick access to revolving credit, both backed by the SBA to reduce lender risk.
“While I’m excited about business acquisitions and the ‘Silver Tsunami’—and I’m also excited about helping prospectors finance their dream purchases, I don’t believe the volume is being driven by acquisitions,” Freedman says.
Ray Drew, managing director of Winston-Salem, North Carolina-based Truliant Federal Credit Union and host of The Art of SBA Lending podcast, notes that as loan volume increases, the average loan size continues to decrease. He says that’s partly because banks and credit unions are stepping in to make smaller loans to businesses. Previously, he says, that space was occupied by fintechs that were charging “an arm and a leg” that could send borrowers into a “death spiral.”
Miami-based Newtek Bank led lenders in the first quarter, approving $738 million in loans. It was also the top lender for fiscal year 2024, with $2.1 billion approved. Live Oak Banking Company, headquartered in Wilmington, NC, followed with $564 million in approvals, while Huntington National Bank in Columbus, Ohio, came in third with $423 million. Together, the first three accounted for 20% of the total loan volume.
“Until a few years ago, most SBA lenders stayed away from smaller loans,” says Drew. “But through the use of technology, lenders have benefited from efficiencies that have made the small loan game more cost-effective.”
