Exploring 2024 Fiscal Year Trends in the SBA 7(a) Loan Program

The Small Business Administration (SBA) 7(a) Loan Program, the flagship initiative for supporting America’s small businesses, had a remarkable fiscal year in 2024. This year we saw impressive growth in the number of small businesses supported by this program, with several transformative trends reshaping the landscape of small business financing. As one of the largest technology providers for SBA lenders, we have combined published data from the SBA and our LenderAI Insights platform to identify unique findings about the SBA 7(a) program.  

In this article, we’ll examine trends driving 7(a) loan approvals to provide lenders and small business owners with valuable insights into SBA loan approvals, borrower profiles, and emerging opportunities.

‍

Trends in 7(a) Lending for FY 2024

In FY 2024, the SBA approved 70,242 loans under the 7(a) program, totaling $31.1 billion. This represents not only the most loans made in over 15 years but also a notable 13% increase in 7(a) funding compared to FY 2023.* From supporting business acquisitions to providing much-needed working capital, the program's expansive reach helped small businesses address a wide array of financial needs.  

Key Growth Drivers

‍

The U.S. has continued to see high rates of new business applications, with an average of 430,000 new applications per month in 2024, for a 17% increase compared to 2020. These new business owners have led to an increased demand for small business financing as these entrepreneurs launch new businesses. The 7(a) program also helps provide working capital, leasehold improvements, and support for business acquisitions.  

‍

‍

Post-pandemic growth in the restaurant and accommodations industry fueled a significant portion of growth for the 7(a) program, with full-service restaurants, hotels and motels, and limited-service restaurants holding the top three spots for industries receiving funding under this program. Growth in these industries has continued since 2023, when these sectors also represented the highest volume of 7(a) loan approvals. Compared to FY2023, loan volume increased by 9.8% for full-service restaurants, 4.7% for hotels, and 20% for limited-service restaurants.

‍

Accelerated Growth for Loans under $500K

‍

One of the most noticeable trends was the growth of small-dollar loans under $500,000. In FY 2024, the SBA approved 56,188 small-dollar loans, amounting to $8.6 billion. This category alone saw a 25% increase compared to FY 2023 and an 85% increase since 2020. This growth highlights the program’s focus on addressing the financing gaps that have long hindered small businesses from accessing affordable capital.  

What’s Driving Small-Dollar Loan Growth?

Growth in 7(a) small-dollar loan activity was fueled by several pivotal SBA changes and policy improvements making it easier for entrepreneurs to access these loans:

1. Modernized Lending Criteria: In August 2023, the SBA implemented simplified underwriting procedures for loans under $500,000, making it easier for lenders to evaluate applications. This modernization allowed for more flexible cash flow analysis and industry-standard underwriting, helping to reduce barriers to small-dollar loans.

2. Increased Participation from Lenders: Reforms, such as the permanent establishment of the Community Advantage program and the lifting of a 40-year moratorium on new non-bank lenders, expanded the pool of SBA lenders. These changes brought new participants, including mission-driven nonprofit lenders, into the 7(a) ecosystem, thereby increasing access to underserved communities.

3. Technological Advancements: The SBA introduced a more streamlined loan application and faster approval processes through software enhancement. Those efforts not only improved the borrower experience but also empowered lenders with tools like pre-approval borrower checks and fraud prevention measures, enabling faster and more secure loan application processing.

In addition, lenders have been able to launch and scale small-dollar loan programs using LenderAI, which allows rule-based workflows and automated decisioning. By implementing LenderAI, lenders can process small-dollar loans efficiently and profitably and attract new client bases to their lending programs.  

‍

Focus on Equity and Inclusion

In FY 2024, the 7(a) Loan Program made significant strides in fostering equitable access to funding, with a focus on supporting entrepreneurs from historically underserved demographics.

‍

‍

• Black Entrepreneurs: The program supported 5,054 loans for Black-owned businesses, totaling $1.4 billion. This represents a 169% growth in loan volume compared to FY 2020.  

• Latino Entrepreneurs: Latino-owned businesses received 8,759 loans worth $2.6 billion, reflecting a 104% increase in loan volume compared to FY2020.  

• Women Entrepreneurs: Women-owned businesses received 14,595 loans for a total of $4.8 billion, for a 77% increase over 2020.  

• Veteran Entrepreneurs: The 7(a) program supported 2997 loans for veteran-owned businesses totaling $1.1B, representing a 60% growth in loan volume compared to 2020.

Driving Factors for Equity-Focused Growth

Growth in 7(a) loans for entrepreneurs from underserved populations has been driven by the increasing number of small business owners from these groups as well as improvements to the 7(a) program, including modernized lending criteria and the expansion of the network of SBA lenders. Historically, entrepreneurs from these underserved groups represent newer and smaller businesses that struggle to obtain SBA loans due to stringent lending criteria. These improvements have made SBA small-dollar loans more accessible to underserved groups, driving increased funding.

Additionally, our clients have been able to leverage SBA 7(a) loans to enhance their Community Reinvestment Act (CRA) ratings, which indicate their commitment to meeting the credit needs of their local communities. By providing 7(a) loans to eligible businesses in underserved demographics, lenders can earn CRA credits in an asset-light manner. Notably, we have observed several of our clients earning premiums exceeding 12% on 7(a) loans when sold in the secondary market, while simultaneously retaining their CRA credits.

‍

Insights into FY2024 SBA 7(a) Trends

The increase in 7(a) funding in FY2024 reflects a number of opportunities for lenders and small business owners to capitalize on the program’s growth.

For Lenders

• With an average of 430,000 new business applications filed per month in 2024, there is a growing pool of first-time business owners in need of funding. This presents an unprecedented opportunity for lenders to expand their reach and tap into new markets.

• The SBA’s introduction of the enhanced Lender Match portal allows lenders to save time on administrative tasks. The new portal, which pre-screens borrowers for eligibility and conducts fraud checks, reduces the time required for manual checks. These improvements allow lenders to focus on building relationships with borrowers and approving loans more efficiently.

• As demand for small-dollar loans continues to rise, lenders can benefit from increased volume while supporting small businesses with flexible financial solutions.

For Small Business Owners

• The expansion of the SBA’s lender network—including non-bank and community-based lenders—offers small business owners a wider range of funding options. Entrepreneurs from underserved populations now have greater opportunities to connect with mission-driven organizations dedicated to supporting businesses like theirs.

• The growth of loans under $500,000 is particularly impactful for startups and early-stage businesses that may not yet qualify for larger funding amounts. These loans bridge crucial financial gaps, enabling businesses to access working capital, make leasehold improvements, or fund expansions.

• With the SBA’s enhanced Lender Match portal, borrowers can now navigate the loan process with fewer hurdles. With the new portal, business owners can submit their information and instantly view a list of eligible lenders, saving time and reducing frustration.

‍

Conclusion

Fiscal year 2024 was a defining year for the SBA 7(a) Loan Program. Through strategic reforms, technological advancements, and an unwavering commitment to inclusivity, the program not only achieved record-breaking results but also laid the foundation for sustained growth and impact. As the number of small businesses seeking funding grows in 2025 and beyond, it is vital for SBA lenders to reexamine their technology and operational strategies to modernize their SBA offerings and meet the needs of entrepreneurs.

Interested in exploring how iBusiness Funding can help your business grow? Contact us today to learn more about how we can help you meet your goals.

*Additional data was provided by the SBA 2024 Capital Impact Report and Census.gov.