SBA lending shrank 28 percent, and the loans that vanished were the small ones

SBA's fiscal year ended on 30 September, and the numbers are now published. In fiscal 2026 the agency approved 56,130 7(a) loans for $32.43 billion. In fiscal 2025 it approved 78,078 loans for $37.29 billion.

Count fell about 28 percent. Dollars fell about 13 percent. Those are not the same story, and the distance between them is the interesting part.

A program can shrink in two directions

If a lending program contracts evenly, both numbers fall together. This one did not. On SBA's own totals, the average approved 7(a) loan went from roughly $477,600 to roughly $577,700, up about 21 percent in a single year.

That is arithmetic on two published figures rather than a statistic SBA reports, but the direction is unambiguous. The program did not shrink proportionally. It shrank from the bottom. Roughly twenty-two thousand loans that existed in 2025 did not happen in 2026, and they were disproportionately the small ones.

If you are buying a business at the smaller end, that is the sentence that matters. The capital did not leave the program. It concentrated.

Who is actually lending

It is worth knowing who writes this paper, and worth noticing that the answer changes depending on what you measure.

By approved dollars, Live Oak Bank led every lender in the country in fiscal 2026 with $2.58 billion across 2,411 approved loans, an average above a million dollars a deal. By loan count it ranked sixth.

By loan count, Newtek Bank led, approving 5,035 loans for $1.38 billion, an average closer to $274,000.

Two lenders, both at the top of the same table, running almost opposite books. If someone tells you a particular bank is the biggest SBA lender, the useful question is which measure they are using, because the answer determines whether that lender is likely to be interested in your deal at all.

Where the new rule lands

Into that contraction, on 1 October, came SOP 50 10 8.1.

On a business expansion or initial acquisition at a Business Purchase Price of $3 million or more, the lender must now obtain an independent quality of earnings report on top of the business valuation it already required. That report has to reconcile the accountant-prepared statements, the tax return, the internal books and IRS transcript data into one adjusted earnings figure, with a cash proof over a trailing twelve months and the last two fiscal years. It cannot be prepared by or for the seller, and where it is required the lender must underwrite debt service to its findings.

Note the threshold is measured on Business Purchase Price, which is the price less owner-occupied commercial real estate at appraised value. A deal above $3 million that includes its building can land below the line.

Put the two facts side by side. The part of the book that held up through the contraction is the larger end. That is also precisely the part the new compliance cost attaches to. The smallest deals, the ones that disappeared in their thousands, are the ones the rule exempts.

What this changes if you are buying

Do not read the headline contraction as credit tightening across the board. It is not evenly distributed, and a well-prepared deal at $2 million is competing in a thinner field than it was two years ago rather than facing a closed window. Thin fields cut both ways.

If you are near $3 million, find out early which side of the line your deal is on. The real estate appraisal is not just a collateral exercise now. It sets the Business Purchase Price, and the Business Purchase Price decides whether a third-party engagement and several weeks are compulsory. Discovering that in week six of exclusivity is expensive.

Pick the lender by the shape of their book, not their league-table position. A bank averaging over a million dollars a loan and a bank averaging under three hundred thousand are solving different problems. Both are at the top of the rankings. Only one of them is likely to want your deal.

And expect the earnings question earlier. Whether or not your transaction triggers the formal requirement, the direction of travel is that somebody reconciles the seller's documents before the money moves. Doing that work yourself, before a lender does it for you, is how you find out what you are actually buying while you can still act on it.

One caution on the numbers

Every figure above is an approval, which is what SBA publishes. Approvals include loans later cancelled or never drawn, so they are not the same as money that moved. They are the right series for measuring demand and lender activity, and the wrong series for measuring deployed capital.

A single year is also a single year. Fiscal 2025 was a record, and part of a 28 percent fall from a record is reversion rather than contraction. What makes this one worth watching is not the size of the drop but its shape: a program that got smaller by losing its smallest loans, meeting a rule that raises costs on its largest.

Related reading

• What the new SBA acquisition rules actually require.
• The $3 million line is not measured on the price you agreed.
• What SBA changed in SOP 50 10 8.1 before it took effect.
• Quality of earnings: the report that moves the price.

Go deeper

If you are buying a business into this market and want the earnings reconciled before a lender does it for you, that is the work I do.

Tomasz Felpel is an investor, founder, and advisor in private markets, based in New York. He publishes the Felpel Private Company Index and has priced more than a thousand private companies.