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 started on October 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, following the Small Business Jobs Act of 2010, which raised from $2 million to $5 million the cap on the amount an individual business owner could borrow.
The 7(a) program has long been a favorite among business buyers. Established in 1953, it allows borrowers to secure loans for up to $5 million, with favorable terms that include low down payments and extended repayment schedules. The loans are especially popular for funding acquisitions of existing businesses, thanks to their government-backed guarantees that reduce risk for lenders.
Mark Edler, the founder of Builders.CPA, an accounting firm that caters to small business buyers, says there are a few reasons for the surge in SBA loan volumes.
“There’s a constant flow of people who are really looking to acquire a business because they’re looking to change their life and lifestyle,” he says. And, unlike big corporations, where M&A activity rises and falls with interest rates, aspiring entrepreneurs buying businesses don’t let high rates stand in the way of their plans.
Edler also points to recent SBA rule changes that have made dealmaking easier. In May 2023, the SBA began allowing borrowers to take out multiple 7(a) loans, offering nearly unlimited funding as long as the acquisitions are in different industries. A December 2024 update went further, permitting buyers to use agency-backed loans while offering the seller 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 gained buyer confidence by proving their resilience during the COVID-19 epidemic.
Add it all up, and Speer says “the record pace of SBA business acquisitions will likely continue through 2025.”
But Jerry Freedman, a principal at Freedom Business Financing, believes acquisitions aren’t what’s fueling the boom. His analysis of the SBA data and talks with lenders lead him to believe that much of the volume is for small loans and SBA Express lines of credit. The SBA’s Small Loans and Express Lines of Credit programs are subsets of the 7(a) loan program, designed to provide faster and more accessible funding. Small Loans offer financing up to $500,000, while Express Lines provide quick access to revolving credit, both backed by the SBA to reduce lender risk.
“While I get the excitement regarding business acquisitions and the ‘Silver Tsunami’—and I am excited too and love helping searchers finance their dream acquisitions, 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 while loan volume is up, the average loan size continues to come down. He says that’s in part because banks and credit unions are stepping in to provide smaller loans to businesses. Previously, he says, that space was occupied by fintechs that were charging “an arm and a leg” which 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 2024, with $2.1 billion approved. Live Oak Banking Company, based in Wilmington, N.C., followed with $564 million in approvals, while The Huntington National Bank in Columbus, Ohio, came in third with $423 million. Together, the top three accounted for 20% of total loan volume.
“Up until a few years ago, most SBA lenders stayed away from smaller loans,” Drew says. “But through the use of technology, lenders have benefitted from efficiencies which have made the small loan game more economical.”
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