The SBA 7(a) loan guarantee limit remains at $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 attack on federal law have pleased many, even as tariffs, immigration restrictions and now higher fuel prices and higher interest rates have kept the small business optimism index below historical averages.
This week they had a clear victory, as the Small Business Administration was announced a new rule that will roughly double the combined guaranteed loan limit for certain capital-intensive borrowers to $10 million, effective July 4. “Anything that can expand the availability of the program to … small businesses is a win-win,” said Bob Coleman, author of the weekly Coleman Report on the SBA and its lending practices. “There is no downside and there are a lot of upsides.”
The SBA guarantees two main types of loans: 7(a) loans are typically used for almost anything small businesses need, and the less flexible 504 loans are 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. However, the new rule treats these caps as separate and provides that businesses that have already taken out $5 million in 7(a) loans can also receive another $5 million in guarantees on 504 loans.
“By doubling the combined loan limits of SBA’s 7(a) and 504 loans, this administration is enabling job creators, particularly manufacturers, to invest in American workers, rebuild our industrial strength and grow our small business economy,” SBA Administrator Kelly Loeffler said in a news release announcing the upcoming rule change.
Traditionally, only a small minority of SBA guarantee users take out 504 loans. In fiscal 2025 the SBA guaranteed 77,600 loans totaling $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 about $7.6 million today.
The National Federation of Independent Business, a trade organization with 300,000 members, said the SBA rule change would help capital-intensive sectors such as manufacturing, construction, retail and hospitality sectors. “The higher borrowing limit will create more room for them to invest, expand and take advantage of opportunities they wouldn’t have otherwise,” said Holly Wade, executive director of NFIB’s Research Center. Wade said she especially expects to see companies spend some of that extra new capital on equipment and real estate, both categories that have become more expensive in recent years.
Pioneer Capital Advisory founder Matthias Smith, who helps companies navigate the SBA loan process, also said doubling the loan limit is a “net positive” for stakeholders and predicted it will likely lead to a new wave of mergers and acquisitions among small businesses simply by providing more capital for small businesses. “It will accelerate mergers and acquisitions in the asset and physical location sectors,” Smith said. “And then from a growth capital perspective, companies that have clean financials that want to double and grow, they’re going to be able to grow through debt rather than just equity.”
Manufacturing is the sector set to benefit the most, Smith said. “Manufacturing is going to become a much more popular space,” he predicted, compared to how investors focused more on asset-based companies such as software developers just a few years ago. “From a market scenario, companies with physical assets will become much more attractive.”
The new loan amounts, Smith added, should give many entrepreneurs the cash they need to close deals they may have already had in mind, which will make the M&A market generally more competitive overall.
“With this change in the program, if you’re buying a business where there’s a very good amount of real estate and it’s almost equally weighted, you can hand over 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. “Now we’re in a waiting period,” he said.
The timing of the new borrowing limits – with an effective date of July 4 – may also mean that the wave of mergers and acquisitions may begin soon after. Attorney Eric Pacifici with SMB Law Group shared with X This week small businesses should consider waiting after the Fourth of July to make any new real estate purchases in order to take advantage of the new loan structure.
“If you’ve signed an LOI to close before July 4th and the seller owns the (property), consider pushing until mid-July,” Pacifici advises. “Talk to your SBA lender before you sign anything.” (The LOI is a letter of intent.)
This could also mean that the manufacturing sector in particular will be in for a busy M&A ride this year. according to BizBuySellmanufacturing acquisitions were already up 16% in the first quarter of this year, although average sales prices fell 23% to about $775,000.
Wade noted that the number of companies already benefiting from SBA loans is quite small relative to the overall small business population in the United States, meaning the policy change may not have a huge impact on the small business landscape. He said only a small percentage of NFIB members rely on SBA loans, as those companies tend to be more mature and have existing relationships with banks that lend to them without collateral.
However, he reiterated that the loan increase will definitely be a boon for some sectors. The new policy, he noted, is in line with other pro-small business moves made by the Trump administration, including making permanent (as part of the One Big Beautiful Bill Act passed last summer) the 20 percent business income deduction for sole proprietorships and small businesses that pass all of their income on the owners’ individual tax returns.
Last October, the SBA made another rule change that also made it easier for small businesses to expand, including through acquisitions, using government-backed loans.
But other SBA changes since Trump took office last January have limited the availability of loan guarantees. Earlier this year, for example, it quietly began holding passive minority investors — other than the actual borrowers who run the business and cosign on a loan — liable if a guaranteed 7(a) loan defaults. The retroactive change means that an investor in a business that previously had an SBA loan in default or default could jeopardize the ability of any other business in which it invests to receive SBA guarantees. An SBA spokesman did not immediately respond to a request for comment Thursday about whether this new practice is still being used by the agency, but an official announcement about that transition was never made.
Last year, as part of a broad immigration crackdown, the SBA required business owners as well as key employees to be citizens or permanent residents for at least six months in order to complete a loan guarantee. Other changes the SBA made were aimed at ending what it called the “era of irresponsible lending” under President Biden and returning to earlier stricter rules.
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