SBA 7(a) Lending Hit a Five-Year High — But Small Loans Shrank

Published 2026-11-09 · eLoanTree Blog

SBA lending had a record quarter — and a split personality. SBA 7(a) lenders approved $10.58 billion in the third quarter of 2026, the largest quarterly dollar volume in five years, according to an analysis of SBA loan-level data released November 2, 2026. The growth came almost entirely from large loans. Loans over $1 million rose 12% year over year and now account for 70% of all 7(a) dollars, while approvals under $150,000 fell 23%.

The same day, the SBA announced its full fiscal year 2026 results: 62,205 guaranteed 7(a) and 504 loans totaling $39.5 billion — the third-highest lending volume in agency history — despite a 43-day federal shutdown that halted SBA lending for nearly two months of the fiscal year.

For a business owner, the headline and the detail point in different directions. Money is flowing, and average rates fell. But the smallest borrowers — the ones the 7(a) program was built for — got a smaller share of it. This article explains the numbers, the new acquisition rules that took effect October 1, and what they mean for an application now.

1. The quarter in numbers

The Q3 2026 figures come from an analysis of the SBA's own loan-level records (data.sba.gov), published November 2, 2026. In the calendar third quarter, 7(a) lenders approved 15,306 loans totaling $10.58 billion — the most dollars in a quarter since 2021. September alone accounted for $5.2 billion across 6,289 loans, nearly half the quarter's total, as lenders cleared pipelines into the SBA's September 30 fiscal year-end.

The distribution is the story. Loans over $1 million rose 12% year over year and now account for 70% of all 7(a) dollars, up from 65% a year earlier — they drove all of the quarter's net growth. Approvals under $150,000 fell 23%. The median loan rose from $207,700 to $258,000, a 24.2% increase, and the average loan reached $691,510, the highest since 2021.

Rates moved in borrowers' favor. The average initial rate on a Q3 7(a) loan was 9.29%, down from 9.45% the prior quarter and 10.16% a year earlier. Restaurants were the most-financed industry, borrowing $1.0 billion at an average 9.22%.

Acquisitions drove the quarter. Loans financing a change of ownership reached 2,402 loans and $3.24 billion — 31% of all 7(a) dollars, against 25% a year earlier and 21% two years earlier. Some September activity may have been pulled forward: new SBA underwriting rules for acquisitions took effect October 1, so deals that could close under the old rules had a reason to close in September.

The SBA 504 program moved the other way: 1,616 projects and $1.83 billion in debentures, down 17% and 19% from a year earlier.

2. The fiscal year: $39.5 billion despite a shutdown

The SBA announced on November 2, 2026 that it closed fiscal year 2026 with $100 billion in capital and related assistance delivered through its flagship programs. The agency guaranteed 62,205 7(a) and 504 loans totaling $39.5 billion — the third-highest lending volume in agency history, building on the record-setting year in fiscal 2025.

The split: the 7(a) program approved 56,130 loans totaling $32.4 billion, while the 504 program approved 6,075 loans totaling $7.1 billion. The Small Business Investment Company (SBIC) program closed the year with a record $60 billion in combined private capital and SBA leverage. The agency also disbursed $192 million in disaster loans and obligated $419 million for counseling, training, and contracting services. More than 9,700 startups were supported, totaling $6.5 billion.

The context is the 43-day federal shutdown, which halted SBA lending for nearly two months of the fiscal year. The SBA said the shutdown froze the 7(a) and 504 programs and kept an estimated $170 million in loans a day from being guaranteed. The September rush — $5.2 billion in 7(a) approvals in a single month — partly reflects lenders clearing the backlog before the fiscal year closed on September 30.

3. The new acquisition rules (SOP 50 10 8.1)

On October 1, 2026, the SBA's new rulebook for lenders — SOP 50 10 8.1 — took effect for applications assigned an SBA loan number on or after that date. The SBA announced it on August 14, 2026 (Information Notice 5000-880695). For business acquisitions, the changes are significant:

First, the required debt service coverage ratio (DSCR) for most acquisitions rises from 1.15x to 1.25x, and it must be shown from historical results — projections cannot replace it. On a business earning $125,000 a year in cash flow available for debt service, a 1.25x requirement caps the annual loan payment at $100,000, against $108,696 at 1.15x. That is the article's own calculation, and it means either a smaller loan or a stronger business for the same price.

Second, a quality-of-earnings (QoE) report is required for acquisition transactions of $3 million or more. Third, changes of ownership must now be underwritten as standard 7(a) loans rather than 7(a) Small Loans — the small-loan path is closed for ownership changes regardless of amount. Fourth, an independent valuation is required on every change of ownership, and the window on personal financial statements shortens to 90 days.

The 2026 eligibility rules still apply alongside the new SOP: since March 1, 2026, 7(a) and 504 owners must be 100% U.S. citizens or nationals — permanent residents are excluded. And the combined limit still stands: $5 million per 7(a) loan and $5 million per 504 loan, with a $10 million combined holding limit effective July 4, 2026 (SBA Policy Notice 5000-879058). When a borrower plans to use both programs, the 7(a) loan should be approved first.

4. Fee relief in fiscal 2027

One change moved in borrowers' favor. For 7(a) loans approved in the federal fiscal year that began October 1, 2026, the upfront guaranty fee is zero on loans of $700,000 or less for three groups: manufacturers (NAICS sectors 31 through 33), food supply chain businesses such as crop and livestock producers, farm supply and grocery wholesalers, grocery stores, and farm product warehousing, and businesses located in a rural area.

The schedule runs through September 30, 2027 and is set one year at a time. The industry list and the rural definition are specific, so a borrower should ask the lender whether the business qualifies before counting on the fee waiver. On the 504 side, small manufacturers can finance up to $5.5 million per project, above the standard $5 million cap.

5. What it means for borrowers

If you are buying a business, the math changed on October 1. A 1.25x DSCR on historical earnings is a harder test than 1.15x on projections, and the QoE report and valuation add cost and time on larger deals. Bring the seller's real financials early, and expect the lender to underwrite the business as it actually performed — not as it might perform.

If you are borrowing under $150,000, the quarter's data is a warning, not a verdict. Small-loan approvals fell 23% while large loans grew, so a small borrower should expect more questions and should compare more lenders. The fee relief for manufacturers, food businesses, and rural borrowers is worth checking first — a zero guaranty fee on a loan of $700,000 or less is real money.

If you are borrowing for real estate or equipment, the 504 program's 19% drop in debenture volume does not mean the program shrank in availability — it means fewer projects closed. The $5 million per-project cap, and $5.5 million for small manufacturers, still stands, and the combined $10 million rule means a business can pair a 7(a) loan with a 504 loan if the project qualifies.

And if your application was delayed by the shutdown, the backlog is the likely explanation — not your file. September's $5.2 billion month shows lenders moved fast once the programs reopened.