The Shrinking SBA Lender Base: Far Fewer Lenders Are Making Loans, but Almost None Have Actually Left

4 hours ago

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Banker reviewing stacks of loan documents in an office setting.

Lumos Data counts 1,141 active 7(a) lenders in the first nine months of fiscal 2026, down 18.9% in a year. The number is real. What it means is more complicated than the headlines suggest.

In July 2026, Lumos Data, a vendor that sells SBA loan analytics, reported that 1,141 lenders had made at least one SBA 7(a) loan so far in fiscal 2026. A year earlier the comparable figure was 1,407. Lumos called it a 30-year low. Within weeks the number was circulating as proof that lenders are abandoning the program.

The count deserves to be taken seriously, and it deserves to be read carefully. It comes from a vendor, it covers nine months rather than a full year, and it does not distinguish a lender that quit SBA lending from one that simply did not close a loan in the window, or from one that was absorbed by a bank that kept lending. Across everything we reviewed, only one lender has a documented exit from the program, and even that case was a handoff to another bank.

This article sorts out what is actually known. It reconciles the competing lender counts, shows how long the decline has been under way, separates the lenders that cut back from the lenders that grew, and identifies where the lost volume sits: in smaller loans, across almost every state. It also lays out the competing explanations and what the evidence can and cannot support. We could not compute the split between lenders that exited, merged and went quiet, because the loan-level files that would allow it could not be accessed for this analysis. The last section explains how it can be done.

What counts as an "active lender"

There is no single official definition in circulation, and the published counts are not interchangeable.

The longest consistent series comes from the Small Business Administration's own budget documents, as reported by the Congressional Research Service. It counts lenders that made at least one 7(a) loan in a fiscal year. For fiscal 2012 through 2022 it runs from 2,476 to 1,601. SBA has not, to our knowledge, published a count for fiscal 2023 through 2026 in a source we could retrieve, though its fiscal 2025 through 2027 budget justifications probably contain them.

Three vendors fill the gap, each on its own basis. Wilary Winn, an advisory firm, built counts from SBA's loan-level data: 1,449 lenders for fiscal 2023 and 1,472 for fiscal 2024. Aloan, a lending software firm, counts 1,256 lenders that made a 7(a) loan in the full fiscal 2026, of which 55 percent made five or fewer. Lumos counts 1,407 and 1,141 for the first nine months of fiscal 2025 and 2026 and does not say how it identifies a lender, whether by SBA location, FDIC certificate or name.

Fiscal year	Lenders	Basis	Source
2012	2,476	Active 7(a) lenders	SBA data, via CRS
2015	2,163	Same	Same
2019	1,708	Same	Same
2021	1,738	Lenders providing 7(a) loans	Same
2022	1,601	Made at least one 7(a) loan	CRS, citing SBA
2023	1,449	Approvals through lenders, from loan data	Wilary Winn
2024	1,472	Same	Wilary Winn
2025, nine months	1,407	Participating lenders, gross approvals, Oct. to June	Lumos
2026, nine months	1,141	Same	Lumos
2026, full year	1,256	Made at least one 7(a) loan	Aloan

Three cautions apply to this table. First, 1,141 and 1,256 do not conflict. One covers nine months and the other twelve, and because more than half of lenders make five or fewer loans a year, an occasional lender closing one loan in the summer can move the full-year count. The 1,141 figure should be compared only with Lumos's own 1,407. The 1,256 figure belongs to a different comparison.

Second, an earlier CRS edition reported about 3,500 "active lenders providing SBA loans" for fiscal 2011, then 2,476 for fiscal 2012. That is a change in wording, not a collapse in a single year, and should be treated as a break in the series.

Third, some figures in circulation are simply wrong. A widely read online reference reports 23,848 lenders completing at least one 7(a) loan in fiscal 2024. The same passage says only 393 lenders made ten or more loans, and fiscal 2024 had 70,242 loans in total, so 23,848 lenders would average fewer than three loans each. The likeliest explanation is that rows in a lender-by-state or lender-by-district spreadsheet were counted as lenders. Another aggregator's 3,156 "active lenders" counts every lender with a funded loan since fiscal 2010, a seventeen-year cumulative figure, not an annual one. A third source's 1,477 covers a different mix of lender types and a different loan threshold.

The decline is more than a decade old

On the consistent "made at least one loan" basis, the number of active 7(a) lenders fell about 35 percent between fiscal 2012 and fiscal 2022, from 2,476 to 1,601. That happened while program volume rose, and SBA itself identified a cause. In its budget justification, as quoted by CRS, the agency said the trend toward continual bank mergers was reducing the number of active lending partners providing 7(a) loans.

Stitching the series together gives a rough picture: 1,601 in fiscal 2022, 1,449 in 2023, 1,472 in 2024, and 1,256 in fiscal 2026. On comparable full-year definitions, that is roughly a 22 percent decline over four years, with the fiscal 2025 full-year point still missing. The fiscal 2026 drop is real, but it is a sharper step on a slope that was already steep, and it is a smaller fall than the headline nine-month comparison suggests.

Bank consolidation does not explain a decline of this size in a single year. The number of FDIC-insured institutions has been falling by roughly 3 to 4 percent annually. We could not match lenders to merger records for this article, so we cannot say how many of the fiscal 2026 departures were mergers. But the arithmetic points to other causes for most of the drop.

What fiscal 2026 looked like

SBA approved 56,130 7(a) loans for $32.43 billion in fiscal 2026, according to Coleman Report and American Banker. Against the prior year's 78,078 loans and $37.29 billion, that is a 28.1 percent fall in count and 13 percent in dollars. The gap between the two reflects a rise in the average loan from about $478,000 to about $578,000, up 21 percent. The programme lost loans faster than it lost dollars because the loans it lost were small.

Two features of the comparison matter for interpretation. First, fiscal 2025 was inflated. The 43-day federal shutdown that began October 1, 2025 suspended SBA's loan-processing system, and lenders rushed loans through in September. Lumos estimates about $1.7 billion was pulled into that month, with September 2025 approvals at $4.6 billion against an adjusted historical average of $2.9 billion. Ready Capital's chief executive gave a larger estimate of $5.3 billion in industry-wide 7(a) originations curtailed by the shutdown. The two numbers measure different things: Lumos's is volume moved into fiscal 2025, while Ready Capital's is an unaudited company estimate of volume lost or delayed.

Second, measured against fiscal 2024, the picture is much milder. Lumos reports nine-month fiscal 2026 approval dollars of $21.8 billion against $21.4 billion two years earlier, up 2.3 percent, and closer to 10 percent higher after adjusting for the September 2025 pull-forward. Lumos's own nine-month comparison with fiscal 2025 shows count falling 33.4 percent, from 61,270 loans to 40,824, and dollars falling 20.9 percent, from $27.6 billion to $21.8 billion. Part of the headline decline is normalization from an unusually busy year.

Who left, and who simply cut back

The distinction matters, and the record supports it.

One documented exit: BayFirst. BayFirst Financial, a Florida bank holding company, announced on September 29, 2025 that it would exit SBA 7(a) lending and sell $103 million of loan balances to Banesco USA at 97 percent of retained balances. The sale closed on December 15, 2025, at $94.6 million, not the $103 million first announced. Banesco took over servicing and offered positions to the majority of BayFirst's SBA staff, and Coleman named Banesco its Emerging SBA Lender of the Year for 2026. BayFirst's small-dollar Bolt program, which had originated about 6,700 loans, had already been shut down. The platform did not disappear; it changed owner.

Deep cuts, not exits: ReadyCap. ReadyCap Lending's approval dollars fell 61.4 percent in fiscal 2026 and its rank slipped from fifth to fifteenth, according to Coleman. Its parent, Ready Capital, attributed a weak second quarter to capital constraints, saying originations of $82 million were well below production capacity. It then completed a securitization of about $145 million of 7(a) loans in late June 2026 and kept a target of $1.5 billion in annual originations. That is a lender with a funding problem, not one leaving the market.

Cuts without announcements. Coleman reports that JPMorgan Chase's approval dollars fell 56.6 percent, First Internet Bank's 51.7 percent and Huntington's 44.6 percent. We found no statement from any of the three announcing a withdrawal from SBA lending, and Newtek's 32 percent fall still left it second in the dollar rankings. Live Oak's dollars fell 9.4 percent to $2.58 billion while its loan count rose 5.7 percent to 2,411, and it remained first.

And a set of lenders that grew sharply. Five of the ten largest lenders increased their approval dollars in fiscal 2026, and five declined, according to Coleman. The dollar figures below are our estimates of fiscal 2025 baselines, backed out from Coleman's published percentage changes, which cross-check against Live Oak's own reported fiscal 2025 total.

Lender	FY2026 approvals	Change	Implied FY2025	Rank, FY2025 to FY2026
Live Oak Banking Co.	$2.58B	−9.4%	$2.85B	1 to 1
Newtek Bank	$1.38B	−32.0%	$2.03B	3 to 2
Bank of Hope	$585.6M	+91.3%	$306M	20 to 6
US Metro Bank	$528.3M	+90.8%	$277M	25 to 10
Pathward	$518.1M	+98.8%	$261M	27 to 11
SmartBiz Bank	$196.7M	+175.4%	$71M	n/p
Bankwell Bank	$181.2M	+209.1%	$59M	n/p
ReadyCap Lending	n/p	−61.4%	n/p	5 to 15
JPMorgan Chase	n/p	−56.6%	n/p	9 to 28
First Internet Bank	n/p	−51.7%	n/p	7 to 19
Huntington	n/p	−44.6%	n/p	2 to 3

Beyond these, U.S. Bank reported a record $943 million in 7(a) lending, up 8.2 percent, and M&T Bank reported a record 2,975 loans and $326.4 million. Bob Coleman summarized the pattern in his rankings commentary: performance ranged far more widely than the 13 percent national decline, with some lenders nearly doubling production and others losing more than half. This is a market in which share moved, not only one in which lenders withdrew.

A market that is both thinning and dispersing

The lender count and the concentration data seem to point in opposite directions, but they are two sides of the same change. Lumos reports that the ten largest lenders held 30.3 percent of fiscal 2026 dollars, down from 42.6 percent in 1996, so the market's top is less concentrated than it was. At the same time, more than half of participating lenders make five or fewer loans a year, and Aloan reports that the top 100 lenders accounted for about 76 percent of dollars. Lumos's own summary is that the program has consolidated in participation while dispersing in share.

The largest originators were not spared. Lumos found the top 25 lenders fell roughly 40 percent, by count and by dollars, against 33.4 percent for the program, with several cutting by more than half. A small number of mid-sized banks are taking share while a long tail of occasional lenders becomes more occasional. That tail may matter more for the lender count than for the dollars. A lender that closes one SBA loan a year is counted when it closes it and drops out of the count when it does not, with no change in its commitment to the program.

Where the lost volume sits

By loan size. The losses are overwhelmingly in smaller loans. In Lumos's nine-month comparison, loans of $500,000 or less fell about 38 percent by count, against about 15 percent for larger loans. The $350,000 to $500,000 band fell 64 percent, which Lumos ties to the lowering of the small-loan threshold from $500,000 to $350,000 under the standard operating procedure that took effect on June 1, 2025. The share of loans at or below $500,000 fell from 80.9 percent to 75.5 percent. Aloan's full-year data show about 67 percent of fiscal 2026 loans were $350,000 or less, but only about 16 percent of dollars.

By state. Loan counts fell in 53 of 54 states and territories, according to Lumos. Only Puerto Rico grew. By dollars, only Mississippi, up 13 percent, and Delaware, up 11 percent, grew. A separate analysis by The Business Journals, reported in September, compared the first half of calendar 2026 with the first half of 2025 and found nationwide approvals down about 18 percent, with Ohio roughly 39 percent below its five-year average and Connecticut, Maryland and the District of Columbia at least 20 percent above theirs. Those comparisons use different windows and baselines from Lumos's, and should not be set side by side.

By industry. Lumos found every one of the twenty major industry sectors fell by count, from utilities down 57 percent to arts and recreation down 21 percent.

What cannot be said. These are losses of approvals, not losses of lender availability. We found no published count of active lenders by state or county, no list of counties with one or no active SBA lender, and no analysis separating rural from urban coverage. A state can see approvals fall 30 percent and still have the same lenders available, and a county can lose its only lender without moving a state total. Answering the coverage question properly requires lender-level data by location, which is available but was not accessible for this analysis.

Why: five explanations, and what the evidence supports

Rule changes. The standard operating procedure that took effect June 1, 2025 raised the minimum credit score for small loans to 165, lowered the small-loan threshold to $350,000, required tax-transcript verification, and restored a 10 percent equity injection for startups and changes of ownership. SBA also raised fees in March 2025, according to American Banker. A March 2026 rule barred lawful permanent residents from SBA loans. These changes line up with the loss in small loans. Eric Rabinovich, who left Live Oak after a decade to found the advisory firm SBA Loan Lab, told American Banker that rule changes made deals harder to close and that the credit box shrank. Ben Johnston, chief operating officer of Kapitus, took a different tone, saying SBA needed to course-correct toward historic levels of profitability while calling the noncitizen rule counterproductive.

The shutdown. SBA Administrator Kelly Loeffler told Forbes in July that the drop in guaranteed loans reflected multiple government shutdowns, not policy decisions. The evidence is partly on her side: the September 2025 pull-forward inflates the comparison, and, measured against fiscal 2024, nine-month volume is slightly up. It is hard to reconcile the shutdown explanation with the decline in the $350,000 to $500,000 band, which tracks a rule change, or with the 40 percent fall at the largest lenders.

Weak demand. The Federal Reserve's January and April 2026 Senior Loan Officer surveys, as cited by Lumos, found small-firm loan demand basically unchanged on net. That points to supply or program factors, not a collapse in borrowers.

Oversight of nonbank lenders. SBA's Office of Inspector General reported in September that loans made by small business lending companies, the nonbank SBA lenders, significantly underperformed. By the report's figures as relayed by Coleman, 1,657 of 11,068 loans from fiscal 2016 through 2023 had defaulted by March 2025, about 15 percent against 9.8 percent for other lenders, and the agency had not conducted safety-and-soundness examinations of these lenders since April 2023. SBA largely disagreed with the draft, though it agreed to a root-cause analysis by March 31, 2027. Those lenders are a small share of lenders by number and loans, so this explains a narrow part of the story.

Community bank appetite. The 2026 survey of community bankers by the Conference of State Bank Supervisors, a convenience sample of 330 banks, found the share offering SBA loans and planning to continue fell to 60 percent from 66 percent. The share planning to exit or substantially limit SBA lending rose to 5 percent from 2 percent. The shift is modest, but it points in the direction of the headline. It is also the only forward-looking evidence in this article that lenders may be leaving the program in numbers.

Further changes arrived on October 1, 2026, too late to explain fiscal 2026. The new procedures require a CPA quality-of-earnings report on acquisitions above $3 million, cap non-cash sources at half of the equity injection, require underwriting on trailing earnings, and end express procedures for acquisitions of $350,000 or less. A separate change effective July 4, 2026 allows $5 million of 7(a) and $5 million of 504 financing for the same borrower, up to $10 million combined. The first full year under the new procedures will show whether the lender base shrinks further.

No single explanation fits all the evidence. The data are consistent with a one-time shutdown distortion, a structural tightening that hit small loans, and a long-running erosion in the number of occasional lenders, all operating at once. Our reading is that the first two explain most of the fiscal 2026 volume drop, while the third explains most of the lender-count decline, but the evidence cannot allocate the shares.

What this means

For borrowers, the more consequential change is not the lender count but the loan-size band. A business seeking $350,000 to $500,000 in fiscal 2026 faced a very different market from one a year earlier. Smaller requests face a higher credit-score floor and tax-transcript verification, and the 25 largest lenders, as a group, cut back more than the program as a whole.

For lenders, the dispersion of share is the notable feature. Bank of Hope, US Metro Bank and Pathward each roughly doubled approvals, and U.S. Bank and M&T reported records. The program has room for lenders that adapt to the tighter credit box, even as others retreat.

For policymakers, the data raise a question the public record cannot yet answer: whether the loss of occasional lenders has left any community without a nearby SBA lender. That is the question that matters for access, and it can be answered with data that SBA already publishes.

What this analysis can and cannot say

It can say that fewer lenders are making 7(a) loans, that the decline has run for more than a decade, that fiscal 2026 volume fell sharply and fell furthest in smaller loans, and that lenders

split between large cuts and large gains.

It cannot say how many lenders left the program, because the published counts do not distinguish exits from inactivity or mergers. It cannot say that any state or county lost its last lender. It cannot supply SBA's own lender counts for fiscal 2023 through 2026, which should be in the agency's budget justifications. And it relies on vendor figures, including those of firms with commercial interests in SBA lending.

How to answer the exit question properly

The answer sits in public data. SBA's loan-level FOIA files and its annual Lender7AActivity spreadsheets identify each lender on every approved loan. A researcher can build a lender key from FDIC certificate or credit-union charter number, count distinct lenders by year and by project state, and then sort each lender active in fiscal 2025 but absent in fiscal 2026 into three groups: merged into an acquirer that kept lending (checked against FDIC's merger history), announced an exit, or simply inactive. The same files, merged with USDA rural-urban codes, show which counties have one or no active lender. SBA typically posts the year-end fiscal 2026 activity reports between mid-November and December, which will provide the first official full-year lender data for the year.

Where the published record goes wrong

This series documents where commonly repeated claims fail against the data. For this topic:

The 1,141 figure comes from Lumos Data, on a nine-month gross-approval basis, with no published definition of "lender." American Banker's coverage of the fiscal 2026 results does not cite it.
The 1,141 and 1,256 figures do not conflict. One covers nine months, the other twelve. Compare 1,141 only with Lumos's 1,407.
The claim that 23,848 lenders completed a 7(a) loan in fiscal 2024 is almost certainly a spreadsheet artifact. SBA's own series puts the count near 1,600 in fiscal 2022, and Wilary Winn's near 1,470 in fiscal 2024.
The drop from about 3,500 lenders in fiscal 2011 to 2,476 in fiscal 2012 reflects different wording in the source, not a collapse.
The "266 lenders left the program" reading is unsupported. The figure is a year-over-year difference in lenders with approvals in a nine-month window.
BayFirst's sale to Banesco closed at $94.6 million, not the $103 million announced.
The inspector general's default comparison for nonbank lenders is about 15 percent against 9.8 percent, using 1,657 defaults on 11,068 loans, not the 14.87 percent figure that has circulated.
Fiscal 2025 7(a) volume appears as 77,600 loans (SBA's preliminary release on the last day of the year) and as 78,078 loans and $37.29 billion in the year-end report. Fiscal 2026 percentage declines vary from 26 to 33 percent depending on whether the source compares full years, nine months or a partial year. We use 28.1 percent by count and 13 percent by dollars on a full-year gross basis.
Estimates of shutdown impact are not comparable: $1.7 billion is Lumos's estimate of volume pulled into fiscal 2025, and $5.3 billion is a company's estimate of volume curtailed.
Kapitus's Ben Johnston is its chief operating officer, not "Capitus CEO," as some aggregators report.

Sources:

Congressional Research Service, Small Business Administration 7(a) Loan Guaranty Program, R41146, and Small Business Administration Business Loan Program Rule Changes in the 118th Congress, R47909
Lumos Data, "SBA 7(a) Program Performance in FY2026," July 15, 2026
Coleman Report, Fiscal 2026 SBA 7(a) Rankings, October 13, 2026
American Banker, "SBA starts new fiscal year with even tighter credit box," October 9, 2026
Aloan, SBA lending analysis, fiscal 2026
Wilary Winn, SBA 7(a) loan program white papers, 2024 and 2025
BayFirst Financial Corp., Form 8-K and press releases, September 29, 2025 and December 2025
Ready Capital Corporation, second quarter 2026 results and earnings call
U.S. Bank and M&T Bank, SBA lending press releases, October 2026
SBA Office of Inspector General, Report 26-14, Small Business Lending Companies' Performance in the 7(a) Loan Program and SBA's Oversight, September 2026
Conference of State Bank Supervisors, 2026 Annual Survey of Community Banks
Federal Reserve, Senior Loan Officer Opinion Survey, January and April 2026, as cited by Lumos
U.S. Small Business Administration, news releases on 7(a)/504 financing limits (July 2026) and fiscal 2025 results (September 30, 2025)
Forbes, interviews with SBA Administrator Kelly Loeffler, July 27, 2026, and coverage of SOP 50 10 8.1, September 22, 2026
The Business Journals, via Real Estate Daily News, September 2026
SBA Loan Index