But, how many small businesses need — or can afford — to take on that much debt? According to Brennan Quenneville, head of SBA lending at Grasshopper Bank, not many.
“The percentage of 7(a) borrowers directly impacted by this change is likely relatively small. Many 7(a) borrowers are well below the SBA’s $5 million cap and therefore aren’t yet constrained by the prior lending limit, and many others don’t have a need for the types of equipment or real estate that the 504 is so effective at financing,” Quenneville said in an email to NerdWallet.
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Higher loan limits don’t address the small-dollar lending gap
“True mom-and-pop businesses are almost never considering loans of this magnitude,” Carolina Martinez, CEO of CAMEO Network, a national support network for micro businesses, told NerdWallet via email.
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Businesses with fewer than 10 employees, like your local hardware store or bakery, face the biggest financing gaps, Martinez said.
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SBA loans are meant to provide financing to small businesses that can’t get bank loans, however, this policy does little to benefit the majority of SBA-qualified borrowers.
“The pool of businesses that the SBA supports is growing smaller, and that will have a trickle-down effect on the economy,” said Martinez.
So, who will benefit from this new policy?
The new rule will most greatly impact established businesses that are in growth or expansion mode, especially those in capital-intensive industries, like manufacturing.
This is the latest in a slew of SBA policies that benefit manufacturing businesses:
The SBA waived 7(a) and 504 guarantee fees for manufacturers for fiscal year 2026.
The SBA is offering $50 million in grants to organizations that provide training for small manufacturers.
Quenneville says that this policy will be a substantial benefit for a limited subset of borrowers:
“Borrowers who will be able to take advantage of these changes will likely represent a minority subset of the overall 7(a) and 504 lending pools, but for those borrowers who can make use of these changes, the impact will certainly be meaningful,” he said.
Erik Daniels, head of SBA lending at U.S. Bank, also noted that the new limit is more reflective of today’s economic environment. The SBA’s previous cumulative cap of $5 million was set in 2010 and would equal roughly $7.5 million today when adjusted for inflation, making the change more significant than an inflation adjustment.
How do the new maximum combined limits work?
Plus, you’ll need to prove to your SBA lender that you can repay two loans without default.
You’ll also need to show two distinct use cases for each loan. For example, you might use the SBA 7(a) loan for a change in ownership or working capital, while using a 504 loan for a real estate purchase. You must apply and get approved for a 7(a) loan first, then you can apply for a 504 loan.
What funding options exist for smaller businesses?
SBA loans are still a top choice for affordable funding. Many small businesses use standard 7(a) and 504 loans for expansion, equipment purchases and working capital needs well below the new combined limit.
Depending on your needs:
SBA 7(a) loans are best for flexible, general business expenses.
SBA 504 loans are best for equipment and real estate purchases.
SBA microloans are best for startups and smaller loan amounts.
These loans, issued by local and community organizations, offer up to $50,000 and have flexible qualification requirements. Microlenders also tend to provide business support and training at little or no cost — which can be useful to small businesses in early stages of growth.
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