The SBA 7(a) loan guarantee limit remains $5 million, but small businesses can borrow another $5 million through a second program.
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The first year and a half of the second Trump Administration has been a mixed bag for small business owners. Tax cuts and an assault on federal regulation have pleased many, even as tariffs, immigration restrictions and now spiking fuel prices and rising interest rates have kept the small business optimism index below historic averages.
This week they had a clear win, as the Small Business Administration announced a new rule that will roughly double the combined guaranteed loan limit for certain capital intensive borrowers to $10 million, effective July 4th. “Anything that can expand the program’s availability to…small businesses is a win-win,” said Bob Coleman, author of the weekly Coleman Report on the SBA and its lending practices. “There’s no downside and there’s a lot of positives.”
The SBA guarantees two main types of loans: 7(a) loans are typically used for just about anything small businesses need and less flexible 504 loans are designated for “major fixed assets.” Congress has set a $5 million loan cap for 7(a) and a $5.5 million cap on the SBA-backed portion of 504 loans. But the new rule treats those caps as separate and provides that businesses that have already tapped $5 million in 7(a) loans can also get another $5 million in guarantees on 504 borrowings.
“By doubling the combined loan limits of SBA’s 7(a) and 504 loans, this Administration is empowering job creators, particularly manufacturers, to invest in American workers, rebuild our industrial strength, and grow the small business economy,’’ SBA Administrator Kelly Loeffler said in a press release announcing the coming rule change.
Traditionally, only a small minority of SBA guarantee users take out 504 loans. In fiscal 2025 the SBA guaranteed 77,600 loans worth a total of $37 billion through the 7(a) program and 6,750 loans totaling $7.8 billion through 504.
The last time the 7(a) loan limit was increased by Congress was in 2010, when the cap was raised to $5 million from $2 million. If the cap had been adjusted for inflation, it would be roughly $7.6 million today.
The National Federation of Independent Business, a trade organization with 300,000 members, said the SBA rules change will help sectors that are capital-intensive, such as manufacturing, construction, retail, and the hospitality sectors. “The higher lending limit will create more room for them to invest, expand, and take advantage of opportunities they might not have otherwise had,” said Holly Wade, executive director of NFIB’s Research Center. Wade said she particularly expects to see companies spending some of that extra new capital on equipment and real estate, both categories that have gotten pricier in recent years.
Pioneer Capital Advisory founder Matthias Smith, who helps companies navigate the SBA loan process, also said the doubling of the loan limit is a “net positive” for stakeholders, and predicted it will likely result in a new wave of mergers and acquisitions among small businesses, simply by providing more capital for small businesses to work with. “It’s going to accelerate M&A in the asset- and physical location-specific sectors,” Smith said. “And then from a growth capital standpoint, companies that have clean financials that want to double down and grow, they’re going to be able to grow through debt instead of just mostly equity.”
Manufacturing is the sector most primed to benefit, Smith said. “Manufacturing’s going to become a lot more popular space,” he predicted, compared to how investors were more focused on asset-light companies such as software developers just a few years ago. “From a buy-side scenario, companies with physical assets are going to become a lot more attractive.”
The new loan amounts, Smith added, should give a lot of entrepreneurs the cash they need to seal deals they may have already had in mind, which will make the M&A market in general more competitive overall.
“With this change to the program, if you’re buying a business where there’s a pretty good amount of real estate involved and it’s almost kind of equally weighted, you can deliver more cash at closing to the seller, and basically be competitive with non-SBA buyers,” Smith said.
The only downside, Smith said, is that the policy won’t go into effect for another month and a half. “We’re now kind of in a bit of a waiting period,” he said.
The timing of the new loan limits – with the July 4th effective date – might also mean that the M&A wave may begin just after that. Attorney Eric Pacifici with SMB Law Group shared on X this week that small businesses should strongly consider waiting until after July 4 to execute on any new real estate purchases, in order to take advantage of the new loan structure.
“If you have an LOI signed for close before July 4 and seller owns the (real estate), consider pushing to mid-July,” Pacifici advised. “Talk to your SBA lender before you sign anything.” (An LOI is a letter of intent.)
That could also mean the manufacturing sector in particular will be in for a busy M&A ride this year; according to BizBuySell, manufacturing acquisitions were already spiking by 16% in the first quarter this year, though median sale prices are down 23% to about $775,000.
Wade noted that the number of companies which already take advantage of SBA loans is fairly small relative to the overall small business population in the United States, which means the policy switch may not have a huge effect on the small business landscape. She said only a small percentage of NFIB’s members rely on SBA loans, since those companies tend to be more mature and have existing relationships with banks that lend to them without the guarantee.
But she reiterated that the loan increase will absolutely be a boon to a number of sectors. The new policy, she noted, is in keeping with other pro-small business moves made by the Trump Administration, including making permanent (in the One Big Beautiful Bill Act passed last summer) the 20% business income deduction for sole proprietors and small businesses that pass through all their income to owners’ individual tax returns.
Last October, the SBA made another rule change that also made it easier to expand small businesses, including through acquisitions, using government-backed loans.
But other SBA changes since Trump retook power in January last year have restricted the availability of loan guarantees. Earlier this year, for example, it quietly began holding passive minority investors – in addition to the actual borrowers running the business and signing for a loan – responsible if any guaranteed 7(a) loan isn’t repaid. The retroactive change means an investor in a business that had a past SBA loan go delinquent or into default could jeopardize the ability of any other business they invest in to get SBA guarantees. A spokesperson for the SBA didn’t immediately respond to a request for comment on Thursday as to whether that new practice is still being utilized by the agency, but a formal announcement about that switch was never made.
Last year, as part of its broad immigration crackdown, the SBA required that owners of businesses as well as key employees be citizens or permanent residents for at least six months, for a loan guarantee to go through. Other changes the SBA has made have been aimed at ending what it has called an “era of irresponsible lending” under President Biden and to go back to previous tighter rules.
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