On October 1, 2025, the SBA stopped issuing loan numbers. E-Tran, the system every 7(a) lender has to touch to get a loan approved, went dark on the first morning of the fiscal year and stayed dark for 43 days while the federal government shut down. Every borrower in the pipeline sat there. Every lender who had spent six weeks assembling a file sat there with them.
Nine months later, the fiscal year has not recovered, and the shutdown is only the part of the story the agency is willing to talk about.
The Ledger
| Line item | FY2026, first nine months | Change vs FY2025 |
|---|---|---|
| 7(a) loans approved | 40,824 | Down 33.4 percent from 61,270 |
| Dollars approved | $21.8 billion | Down 20.9 percent from $27.6 billion |
| Loans of $500,000 or less | Not separately published | Down 38 percent by count |
| Loans above $500,000 | Not separately published | Down 15 percent by count |
| The $350,000 to $500,000 band | Not separately published | Down 64 percent by count |
| Active 7(a) lenders | 1,141 | Down 18.9 percent, a 30-year low |
| Franchise lending | Not separately published | Up 7.4 percent by count, up 51.3 percent by dollars |
The Shutdown Alibi Only Covers So Much
Give the shutdown its due. Forty-three days with no loan numbers is a real hole, and it did not just remove volume from October and November. It moved volume backward. Roughly $1.7 billion of lending got pulled forward into September 2025 by lenders who could see the cliff coming, which is why September closed at $4.6 billion against a historical average of $2.9 billion, a month running 56 percent above normal. That $1.7 billion is counted in the prior fiscal year, so it inflates the base you are comparing against and deepens the hole you are comparing it to. Both ends of the ratio got worse for the same reason.
Now here is the part the alibi does not cover. Against fiscal 2024, a year with no shutdown at all, FY2026 dollars are actually up 2.3 percent, from $21.4 billion to $21.8 billion. Dollars held. Loan count did not. The program is moving roughly the same amount of money through a third fewer loans, which means the average loan is getting larger, which means the program is drifting toward bigger borrowers. That is not a shutdown artifact. That is a shape change.
Where The Small Loans Went
Look at the size bands and the drift stops being abstract. Loans of $500,000 or less fell 38 percent by count. Loans above $500,000 fell 15 percent. One slice of the board fell off a cliff on its own: the $350,000 to $500,000 band collapsed 64 percent, and the cause is not mysterious. SOP 50 10 8, the SBA's own standard operating procedure rewrite, took effect June 1, 2025, and it re-tightened underwriting on exactly the loans that had been getting the lightest touch.
Reasonable people can defend that rule. Loose underwriting on small loans is how you end up with the fraud pool we have spent this entire site documenting. But you do not get to tighten the screws on the $350,000 borrower, watch that band lose two thirds of its volume in a year, and then describe the result as a shutdown problem.
The Lenders Are Leaving
This is the number that should end careers, and it will not get a press release. The count of lenders actively originating 7(a) loans fell 18.9 percent in a single year, down to 1,141. That is the lowest active-lender count in thirty years. And the 1,141 figure flatters the situation badly, because more than half of those lenders made five or fewer loans in the year. A bank that writes four SBA loans annually is not an SBA lender in any meaningful sense. It is a bank that did somebody a favor four times.
The top of the market thinned out too. Volume at the 25 largest lenders fell roughly 40 percent. When your biggest, most specialized, most operationally committed originators cut output by two fifths, the borrowers they were serving do not migrate to a smaller bank. They just do not get a loan.
Fifty-three of 54 states and territories declined by count. All 20 NAICS sectors declined. There is no region of the country and no industry in the economy where this program grew, with one exception.
The One Thing That Grew
Franchise lending. Up 7.4 percent by loan count and up 51.3 percent by dollars while every state and every sector went backward.
Franchise deals are the easiest 7(a) files in existence. The concept is pre-vetted, the buildout costs are documented by the franchisor, the failure rates are on a spreadsheet somebody else built, and the collateral picture is standardized. When a lender base shrinks by a fifth and the survivors are triaging, they keep the file that underwrites itself. So the woman opening an independent bakery in a town with 4,000 people loses her loan officer, and the buyer of a regional sandwich franchise gets a 51 percent bigger pool of dollars to draw from. Nobody decided that. Everybody's individually rational triage decided that.
And The Agency's Answer Was A Bigger Ceiling
On July 4, 2026, new rules let qualified borrowers stack a $5 million 7(a) loan on top of a $5 million 504 loan, doubling the combined maximum from $5 million to $10 million. That is the headline reform arriving in the middle of the collapse described above.
Here is who it reaches. Only 6.8 percent of SBA borrowers receive loans larger than $2 million at all. The majority of 7(a) loans go to businesses with five or fewer employees, and the average loan to those businesses this fiscal year is $377,192. The new ceiling sits more than twenty-six times above that average.
Even the lending industry says so out loud. Brennan Quenneville, who heads SBA lending at Grasshopper Bank, put it as "the percentage of 7(a) borrowers directly impacted by this change is likely relatively small." Carolina Martinez, chief executive of the CAMEO Network, was blunter: "True mom-and-pop businesses are almost never considering loans of this magnitude." To reach the new $10 million ceiling you need a credit score of 700 or better, two years in business, strong revenue, significant collateral, and proof you can service both loans without defaulting. The businesses that clear that bar were never the ones the 38 percent collapse happened to.
The Fair Reading
The honest counterargument deserves space. A 43-day shutdown at the exact start of a fiscal year is genuinely catastrophic for a loan program, and no agency recovers from that cleanly. Tighter underwriting on small loans is a defensible response to a pandemic-era fraud disaster that this site has spent years cataloguing, and some of the volume that vanished was volume that should never have existed. Lenders exiting a program during a rate environment they dislike is a market behavior, not an SBA decision. And raising the combined cap costs taxpayers nothing and does help capital-intensive manufacturers, who are a real constituency.
All of that can be true and the shape of the year still tells you where this program is heading. The small end shrank hardest, the lender base hit a thirty-year low, franchises absorbed the growth, and the reform that got the press release raised the ceiling for the top 6.8 percent. Every individual decision defensible. The aggregate result is a small business lending program that is quietly becoming a mid-market lending program.
What Would Fix It
- Publish the active-lender count monthly, alongside approvals, the way the agency publishes dollar volume. A program losing a fifth of its originators in a year should not have to be reconstructed from third-party analysis.
- Report loan counts by size band in the standard weekly lending report, so a 64 percent collapse in one band is visible the month it happens rather than nine months later.
- Audit SOP 50 10 8 against actual FY2026 outcomes in the sub-$500,000 space and publish what the tightening cost in loans not made, not just in defaults avoided.
- Before announcing the next ceiling increase, publish the share of borrowers the previous one reached. The agency has that number and it starts with a decimal point.
If your loan officer stopped returning calls this year, or your bank quietly exited the program while your file was open, send us the story. The rest of the receipts are filed here.
How This Was Checked
- FY2026 first-nine-months figures, all read today from published fiscal 2026 7(a) program performance analysis covering October 1, 2025 through June 30, 2026: 40,824 loans against 61,270 a year earlier (down 33.4 percent), $21.8 billion against $27.6 billion (down 20.9 percent), and the FY2024 comparison of $21.4 billion rising to $21.8 billion (up 2.3 percent). The 40,824 and $21.8 billion figures were separately corroborated today against independent SBA loan statistics coverage.
- The 43-day shutdown running October 1 to mid-November 2025, the suspension of E-Tran and of new 7(a) loan number issuance, the roughly $1.7 billion pulled forward into September 2025, and September 2025 approvals of $4.6 billion against a $2.9 billion historical average: same FY2026 program performance analysis, read today.
- Size-band changes (loans at or under $500,000 down 38 percent by count, loans above $500,000 down 15 percent, the $350,000 to $500,000 band down 64 percent) and the attribution to SOP 50 10 8 effective June 1, 2025: same source, read today.
- Active 7(a) lender count of 1,141, down 18.9 percent year over year to a 30-year low, more than half making five or fewer loans annually, top 25 lenders down roughly 40 percent, 53 of 54 states and territories declining by count, all 20 NAICS sectors declining, and franchise lending up 7.4 percent by count and 51.3 percent by dollars: same source, read today.
- The July 4, 2026 change allowing a $5 million 7(a) loan combined with a $5 million 504 loan for a $10 million total, up from a $5 million combined maximum; the 6.8 percent of borrowers receiving loans above $2 million; the $377,192 average loan to businesses with five or fewer employees in fiscal 2026; the 700-plus credit score, two-years-in-business, revenue, collateral and repayment requirements; and the quotes from Brennan Quenneville of Grasshopper Bank and Carolina Martinez of the CAMEO Network: national small-business lending coverage of the loan maximum change, read today.
- Arithmetic performed today on the figures above: the $10 million ceiling sitting roughly 26.5 times above the $377,192 average, and the observation that flat dollars against falling counts implies a rising average loan size.
- Not checked and not claimed: full fiscal year 2026 totals, which do not exist yet; 504 program volume; default or charge-off rates for any of these cohorts; how many of the departed lenders exited formally versus simply originated nothing; and whether the SBA disputes any of these third-party tabulations.