(September 22, 2026) -- Small businesses continue to seek financing, but fewer lenders are participating in the U.S. Small Business Administration’s primary loan program as tighter underwriting standards, elevated borrowing costs and new eligibility rules reshape the lending environment.
Lenders approved approximately 27,000 SBA 7(a) loans nationwide between Jan. 1 and June 30, down about 18 percent from more than 33,000 during the same period in 2025, according to SBA data analyzed by The Business Journals.
The value of approved loans also declined, falling to slightly more than $15 billion during the first half of 2026 from approximately $16.2 billion one year earlier.
The 7(a) program is the SBA’s largest and most flexible business lending program. Loans can be used for working capital, equipment, inventory, business acquisitions, debt refinancing and commercial real estate. Most 7(a) loans are limited to $5 million and are issued by participating lenders with a partial federal guarantee.
Industry experts say the decline does not necessarily indicate weakening demand among small businesses. Instead, fewer financial institutions are participating as lenders adjust to stricter underwriting requirements and reassess the performance of loans originated during the period of rapid lending growth following the pandemic.
Rohit Arora, CEO of small business financing platform Biz2Credit, told The Business Journals that lenders have been dealing with stressed loan portfolios and historically high default rates. Those conditions have made some institutions more cautious about issuing additional SBA-backed loans.
Smaller lenders may also find the program less attractive because SBA lending requires specialized staff, regulatory knowledge and significant administrative resources. Without a substantial volume of small business lending, institutions may determine that the financial return does not justify the investment required to participate.
Eligibility changes have contributed to the reduction as well. The SBA announced in March that businesses partially or fully owned by lawful permanent residents would no longer qualify for new SBA-backed loans. Applicants must now be entirely owned by U.S. citizens or nationals whose principal residence is within the United States.
Higher borrowing costs remain another obstacle. Although SBA guarantees can make financing available to businesses that might not qualify for conventional credit, borrowers remain responsible for repaying the loans with interest. Rates on variable 7(a) loans are generally tied to the prime rate, subject to SBA-established maximums.
Despite the year-over-year decline, SBA lending activity remains above the levels recorded during several earlier post-pandemic years. Restaurants, bars, amusement businesses and gambling establishments were among the industries receiving more 7(a) approvals than their five-year averages.
Geographically, the Midwest experienced some of the steepest reductions. Ohio recorded approximately 1,000 approvals through June, about 39 percent below its five-year average. Michigan and Minnesota also reported substantial declines. Connecticut, Maryland and Washington, D.C., meanwhile, exceeded their five-year averages by at least 20 percent.
The trucking and logistics industry experienced the largest sector-specific contraction. Approximately 500 SBA loans were approved for trucking and logistics companies during the first half of 2026, compared with an average of more than 1,000 during the same six-month period over the previous five years.
Industry observers attributed the pullback to rising fuel costs, driver shortages, tariff uncertainty and continued consolidation throughout the logistics sector. Lenders may also be approaching trucking applications more cautiously following financial difficulties among carriers during the prolonged freight downturn.
The current lending environment presents mixed implications for commercial real estate. Fewer SBA approvals could make it more difficult for entrepreneurs to purchase owner-occupied buildings, acquire existing businesses or finance expansions. However, continued demand for capital suggests that lending activity could recover if borrowing costs ease and more financial institutions return to the SBA market.