The Small Business Administration (SBA) loan program has witnessed a remarkable surge in lending activity in 2025, marking a near-record start to the fiscal year. The 7(a) loan program, a cornerstone of the SBA’s lending initiatives, approved a staggering $8.8 billion in loans during the first quarter, representing the second-fastest start since record-keeping began in 1991 and a significant 38% increase from the same period in 2024. This robust performance echoes the program’s success in 2011, following legislative changes that increased the borrowing limit for individual business owners. The resurgence of the 7(a) program, established in 1953, underscores its enduring appeal among entrepreneurs seeking to acquire existing businesses or launch new ventures. The program’s attractive terms, including low down payments, extended repayment schedules, and government-backed guarantees, significantly mitigate lender risk, making it a particularly desirable financing option.
Several factors contribute to this surge in SBA lending. Firstly, the desire for lifestyle changes and entrepreneurial pursuits fuels a consistent stream of individuals seeking to acquire existing businesses. Unlike large corporations whose merger and acquisition activities are often influenced by fluctuating interest rates, aspiring entrepreneurs remain undeterred by higher rates, demonstrating a strong commitment to their business ventures. Secondly, recent SBA rule changes have played a crucial role in facilitating dealmaking. Notably, the implementation of a policy allowing borrowers to obtain multiple 7(a) loans, provided the acquisitions are in different industries, has expanded access to funding. Further enhancing flexibility, an update in December 2024 now permits buyers to utilize SBA-backed loans while offering sellers equity in the newly acquired business, a previously prohibited option.
Furthermore, demographic trends are driving the increased availability of established businesses ripe for acquisition. Baby Boomers, approaching retirement, are increasingly seeking to exit their businesses, creating a robust supply of well-established and profitable enterprises. These businesses, many of which have demonstrated resilience during economic downturns, including the COVID-19 pandemic, instill confidence in potential buyers seeking stable and proven ventures. The combination of these factors—entrepreneurial aspirations, regulatory changes, and demographic shifts—suggests that the record pace of SBA-backed business acquisitions will likely persist throughout 2025.
However, alternative perspectives exist regarding the primary drivers of the lending surge. Some analysts contend that the boom is not solely attributable to business acquisitions. Examination of SBA data and conversations with lenders suggest that a significant portion of the increased volume is driven by smaller loans and SBA Express lines of credit, programs designed for quicker and more streamlined access to capital. These programs, subsets of the 7(a) loan program, offer expedited funding options, including Small Loans up to $500,000 and Express Lines of Credit providing revolving access to working capital, both backed by the SBA to minimize lender risk. This perspective highlights the importance of these programs in meeting the diverse funding needs of small businesses, particularly those requiring smaller loan amounts or flexible credit lines.
Another factor contributing to the increased loan volume is the evolving role of traditional lending institutions in the small business lending space. Banks and credit unions are increasingly stepping in to provide smaller loans, filling a void previously occupied by fintech lenders who often charged exorbitant fees. This shift has resulted in a decrease in the average loan size, as traditional lenders leverage technology to efficiently process smaller loans, making them more economically viable. This increased competition in the small business lending market benefits borrowers by providing more accessible and affordable financing options, reducing reliance on high-cost fintech lenders.
The landscape of SBA lending in 2025 is marked by a convergence of factors contributing to its near-record growth. While business acquisitions fueled by entrepreneurial aspirations and a robust supply of established businesses play a significant role, the growth of smaller loans, the increased participation of traditional lenders, and regulatory changes enhancing access to capital all contribute to the overall surge. This multifaceted growth reflects the evolving needs of the small business community and the responsiveness of the SBA lending program in providing diverse and flexible financing options to support their growth and development. The leading lenders in the first quarter, including Newtek Bank, Live Oak Banking Company, and The Huntington National Bank, exemplify the significant role of both specialized SBA lenders and traditional banking institutions in facilitating this lending boom. This collective effort underscores the commitment to fostering small business growth and economic vitality through accessible and efficient financing solutions.
