5 SBA Loan Trends in 2025

2024 was a record breaking year for SBA loan volume despite also having record high interest rates. So what are all these entrepreneurs seeing that has them lining up in droves to borrow money from SBA lenders like me? Could it be the longer repayment schedules, the lower equity injection requirements, or maybe there just aren't any other financing options out there right now. Stick around and we'll break it all down. Hey, I'm Ray Drew, an actual SBA lender, and in this video, I'm gonna be sharing the top five latest trends in the wonderful world of SBA. And be sure to stick around until the end because the last trend I'm gonna discuss comes with a big red flag attached to it. Okay, first up, the overall lending environment. I would say that we're in a very normal environment right now, and normal is good. 2020 sort of sent us down this path of craziness and by and large, banks have come down off that high. And we're getting back to basics. We SBA lenders are trying to make good loans to folks with good experience for solid cash flowing businesses. Now, my friends over in conventional lending world, they had a pretty rough 2024, and that's one of the reasons the SBA program went gangbusters last year. We came in and filled in a lot of the gaps that conventional lenders left behind. Certain industries that got shied away from, certain types of real estate assets, and businesses that took a hit because of inflation, those all shifted over towards SBA loans. And with interest rates on the downward trend, it's gonna be tailwinds for SBA lenders, not to mention some much needed relief for current SBA borrowers that have variable rate interest rate loans. Trend number two, real estate is back. SBA 7A rates were as high as 11 1⁄2% last year. And as a result, for the first time since I can remember, renting was more economical than buying your building for a lot of small business owners. Well, that's changed, and we'll continue to get even more advantageous if the Fed continues to cut. The SBA 7A program also finances assets like hotels, self-storage facilities, car washes, businesses where the real estate is the business, and the business is the real estate. And those types of transactions are gonna be a big driver of SBA lending in 2025. Trend number three is one we're at the beginning stages of, and that is the debt refinance craze. SBA loans allow you to refinance existing business debt. And so all of those seller-financed business acquisitions from two, three years ago, all of those properties bought with bridge financing, all of these owner-occupied commercial real estate loans maturing at banks that no longer have the appetite, this is all gonna be funneling down to SBA lenders like myself, because I am still lending, by the way, so if you need a loan, hit me up. Now, maybe you're sitting there with some debt on your business, and you're wondering if refinancing into an SBA loan makes sense. Well, chances are it will save you in monthly debt service, and SBA loans don't have any balloons or loan covenants. So if you like more cash flow and less uncertainty, then yeah, this might be something you wanna take a look at. Next up, trend number four, this is the one I'm most excited about. Most of you know I love financing business acquisitions. Well, as you may have seen in my previous video where I'm holding a broom in the thumbnail because that's what people do now, 2023 brought in sweeping changes to the SBA 7A program, and one of the big ones being allowing partial change of ownership transactions. In other words, previously, if you were gonna use an SBA loan to buy a business, you had to buy 100% of the business, and then the seller had to exit, but now you can use an SBA loan to buy into a business and basically let the seller retain a portion of the equity and even remain in the business as an employee, and this concept had not been allowed in SBA lending since, well, ever, but now it is. When this was announced, I was eager to see how it would play out, and now sitting here, a little over a year later, I can honestly say that I'm pleasantly surprised with how this has been leveraged by buyers and sellers to make deals work. I'm seeing a lot of business acquisitions come across my desk with sellers retaining 5, 10, 15% equity and they're doing it to smooth out that transition, mitigate seller dependency risk, allow the seller to remain in the business as an employee, often as a salesperson, and it helps solve licensing issues on businesses being acquired into trades. So SBA Ray rates this new feature 10 out of 10. Finally, last but not least, the last trend I wanna discuss is folks buying businesses to operate remotely. I get it, searching for a business is tough, and perhaps you'd like to broaden your search, but let me tell you, transitioning ownership and operating a small business is a lot tougher. Running a physical business in an industry you're just starting to learn about from three states away is a trend that I've gotta be honest, I'm not crazy about, but I am seeing it more and more. Can physical businesses be operated remotely? Sure, and if everything goes smoothly, it'll be fine. The problem is when things don't go smoothly, and unfortunately, that happens way more than people like to admit. Now, I'm not gonna go point for point on why I think this is a bad idea for most business buyers, but I think we can all agree this scenario comes with some added risk, and anyone considering it should think long and hard before pulling the trigger on that big, fat, personally guaranteed SBA loan. So those are the latest trends that I'm seeing as I sit here at the beginning of 2025, and this is coming from someone who actually works at a lending institution who has financed almost $200 million worth of SBA 7A loans over the last four years. I'm curious, do you have any big plans for 2025 that's gonna require some SBA financing? Leave it in the comments because I might just make a video about it here this year. Hope this was helpful. This is SBA Ray signing off. So there you have it. If you found that video helpful and you want more expert advice from an actual SBA lender, then I would invite you to hit that subscribe button because I've got plenty more where that came from.