The Small Business Acquisition Market Before 1 October: What the Numbers Look Like Going In
Small business ownership changing hands under SBA financing
On 1 October 2026 the rules for buying a business with an SBA loan change more than they have in a decade. Almost everything written about it so far is prediction. This piece is the opposite: the market as it actually stands on the eve of the change, measured from the loan file and from the published transaction data, so that in three months anyone can check what actually happened against what was claimed.
Why a Baseline Matters More Than a Forecast
Every adviser in this market has now published a view on what SOP 50 10 8.1 will do. Multiples will compress. Buyers will need more cash. Deal flow will migrate to the expansion lane. Sellers will price at $2.9 million to duck the diligence threshold.
What can be measured is the starting position. If the acquisition market is going to change, it changes from somewhere, and the somewhere is documented. Below is that starting position, drawn from the SBA loan-level file and from the published transaction series, with every figure dated. When the fourth-quarter data arrives, the comparison will be available to anyone who wants to make it.
SBA Acquisition Lending, From the Loan File
Computed by Loan Analytics from the SBA 7(a) loan-level FOIA file, March 2026 release, net of cancellations. Change of ownership has been a coded field since fiscal 2018.
Fiscal year | Acquisition loans | Acquisition dollars | Average loan | Share of all 7(a) dollars | Share of acquisition dollars at $3M or more |
2020 | 4,945 | $5.07B | $1.02M | 26.0 percent | 28.7 percent |
2021 | 6,040 | $6.86B | $1.14M | 21.3 percent | 33.5 percent |
2022 | 4,615 | $5.39B | $1.17M | 23.1 percent | 33.4 percent |
2023 | 4,655 | $5.08B | $1.09M | 20.6 percent | 33.3 percent |
2024 | 5,570 | $6.17B | $1.11M | 22.3 percent | 35.4 percent |
2025 | 6,910 | $8.12B | $1.18M | 25.0 percent | 37.8 percent |
2026, through March | 2,869 | $3.41B | $1.19M | 25.7 percent | 36.5 percent |
Four things in that table are worth holding on to.
Acquisition lending is a stable quarter of the programme. Between a fifth and a quarter of every net 7(a) dollar has financed a change of ownership in each of the last seven years, through a rate cycle that ran from near zero to above five percent and back. Whatever else is true of this segment, it is not volatile.
The average ticket has risen every year but one. From $1.02 million in 2020 to $1.19 million through March 2026. Slow, steady, and mostly inflation rather than a change in the kind of business being bought.
The share above $3 million has risen every year since 2020, from 28.7 percent to a peak of 37.8 percent in fiscal 2025. That is the population the new Quality of Earnings requirement lands on, and it was growing before anyone knew the requirement was coming. The slight dip to 36.5 percent in the first half of fiscal 2026 is within normal half-year variation and should not be read as a trend.
Fiscal 2026 is not collapsing. Total 7(a) volume is down sharply against fiscal 2025, a record year inflated by a rush to close ahead of the June 2025 SOP and by roughly $1.7 billion pulled into September 2025 ahead of the government shutdown. But acquisition lending held its share at 25.7 percent through March, higher than 2023 or 2024. The decline in overall 7(a) volume is concentrated in loans under $500,000, with the $350,000 to $500,000 band down by roughly two thirds, while loans above $500,000 are down about 15 percent. Acquisitions sit mostly above that line.
The Monthly Shape, and the September Question
Everyone is watching for a September 2026 pull-forward, on the theory that lenders will rush loan numbers out before 1 October to keep files under the old rules. Here is the monthly acquisition series from the same file, which is the only way to know what a rush looks like when it happens.
Month | Acquisition loans | Acquisition dollars |
March 2025 | 778 | $820M |
April 2025 | 431 | $509M |
May 2025 | 839 | $1.04B |
June 2025 | 336 | $434M |
July 2025 | 513 | $652M |
August 2025 | 492 | $598M |
September 2025 | 823 | $990M |
November 2025 | 499 | $561M |
December 2025 | 573 | $736M |
January 2026 | 897 | $1.06B |
February 2026 | 414 | $498M |
March 2026 | 486 | $557M |
Two notes on reading it. October 2025 is absent because the government shutdown closed the loan system for 43 days from 1 October, which is itself the clearest illustration of how completely this series depends on an administrative switch rather than on underlying demand. And the May 2025 and September 2025 spikes are the two known rushes: May ahead of the 1 June SOP, September ahead of the shutdown.
So a genuine pull-forward looks like roughly $1 billion in a month against a $500 million to $650 million baseline. If September 2026 prints near that, the rush was real. If it prints near $600 million, advisers were louder than lenders were motivated.
There is a reason to expect a smaller effect this time, and it has been under-discussed. The previous two rushes were one-directional: every file was better off closing early. This one is not. A deal with heavy investor equity, projection-dependent coverage or a price above $3 million is better off under the old rule. But an established operator buying a business in the same four-digit industry group is better off waiting, because the Business Expansion lane that 8.1 broadens carries a 1.15x coverage floor rather than 1.25x and an injection the lender can waive. Some volume has reason to hold back.
What the Broader Transaction Market Looks Like
The SBA file only sees financed deals. The broader business-for-sale market is tracked by broker-reported series, which are directional rather than audited but are the best available.
Volume is contracting while pricing holds. The most recent quarterly data, covering April to June 2026, recorded 2,117 closed transactions, down 10 percent both year over year and quarter over quarter, on total enterprise value of $1.8 billion. Median sale price was $349,250, down 1 percent year over year. Median cash flow $155,921, down 3 percent. The average cash flow multiple was 2.7, up 2 percent. The prior quarter recorded 2,345 transactions at a $350,000 median.
That combination, volume down 10 percent and price down 1 percent, describes a market that is selecting rather than repricing. Fewer deals are clearing, and the ones that clear are clearing near where they always did.
The middle of the market is stronger than the bottom. In the $5 million to $50 million segment, the multiple climbed from 5.5 to 5.8 times EBITDA in the second quarter of 2026, the highest since early 2022, with 87 percent of deals above $5 million attracting at least three offers and a third attracting ten or more. Cash at close averaged 83 to 92 percent of transaction value.
Those different multiples across sources are not contradictions. They measure different slices: 2.7 times is a cash flow multiple on Main Street businesses with a median price around $350,000; 5.8 times is an EBITDA multiple on lower middle market deals; a broader private-company database puts the all-industry median near 3.5 times EBITDA; search fund acquisitions run near 7 times on enterprise values around $14 million. Quote the one that matches the deal size in front of you.
Time to close has lengthened. Main Street deals run six to ten months, lower middle market eleven to twelve, and the $2 million to $5 million band moved from nine months to eleven and a half. Separately, reported time to sell is up 46 percent year over year, with the most common cause of a failed engagement being a valuation gap at 26 percent of failures.
And the seller financing gap is the number to watch. Ninety percent of buyers expect seller financing. Twenty-nine percent of owners plan to offer it. Nearly half say they will not, and 23 percent are undecided. Seller notes currently finance roughly 10 to 16 percent of deal value in most Main Street and lower middle market segments, dropping to about 5 percent in the $5 million to $50 million band.
Hold that gap in mind, because 8.1 makes seller notes more expensive to use, not less.
The Structures as They Stand Today
Worth recording precisely, because these are the arrangements the new rule reorganises.
Equity injection. A minimum 10 percent of total project cost on a complete change of ownership. A seller note counts toward it only on full standby for the entire loan term, and only up to half the requirement, which is 5 percent of project cost. Investor equity is uncapped: passive investor capital can currently fund the entire required injection provided it is true equity with no repayment or redemption feature. Investors below 20 percent with no control do not sign personal guarantees.
Business Expansion, as currently defined, requires the same six-digit NAICS code, identical ownership and the same geographic area, and carries no minimum injection.
Seller note refinancing becomes available after the note has been in place and current for 24 months.
Partial changes of ownership permit any percentage to move to a new owner provided at least one original owner remains, and the seller may stay on.
Consulting by the seller is permitted for up to 12 months.
Search fund and independent sponsor capital stacks currently run roughly 50 to 55 percent senior debt, 5 to 10 percent seller note or earn-out, and 35 to 45 percent acquisition equity, with a median of sixteen investors at acquisition on a typical search fund deal.
Every one of those six items changes on 1 October. Investor equity moves into a capped bucket shared with standby and seller debt, together limited to half the injection. Business Expansion loosens to four digits and drops the geographic and ownership tests while adding a two-year seasoning requirement. Seller note refinancing extends to 36 months. An outside buyer in a partial change is capped below 50 percent and may not become the largest owner. Consulting extends to 24 months. And the required injection on an Initial Acquisition cannot be reduced at all.
The Lender Side
One structural fact deserves more attention than it gets. The number of banks and non-banks actively making 7(a) loans has fallen to 1,141, a thirty-year low, down 18.9 percent in a single year. More than half of those made five or fewer loans.
At the same time the largest originators have grown. The leading SBA lender approved $2.8 billion across 2,280 loans in fiscal 2025, up 44 percent year over year; the second exceeded $2.0 billion; the leader by count approved more than 6,000 loans.
So the market is consolidating into specialists while the long tail exits. That matters for 8.1 in a specific way: the new rule adds diligence steps, category coding, an equity source trace and a mandatory third-party report above $3 million. Those are fixed costs of doing an acquisition file. A lender making four acquisition loans a year absorbs them badly. A lender making four hundred absorbs them easily. The rule is likely to accelerate a consolidation that was already running.
What the Market Expects, Labelled as Expectation
Everything in this section is anticipation published before the rule took effect. It is recorded here so it can be checked later, not because it is evidence.
Advisers broadly expect multiple compression on marginal deals, describing the 1.25x historical coverage test as a valuation governor that ties price to what trailing cash flow can service. They expect first-time buyers, particularly self-funded searchers, to need materially more of their own cash, because the cap on investor equity removes the structure that made small-check searching possible. They expect deal flow to migrate toward the Business Expansion category, advantaging existing operators buying bolt-ons over first-time buyers. Some expect sellers to price deals at $2.9 million specifically to stay under the diligence threshold. And some expect displaced volume to move to conventional and non-bank lending.
Our own view, for what it is worth and stated as a view: the coverage test will matter more than the diligence threshold, because it applies at every deal size while the report applies only above $3 million. Ten percent of acquisition loans are above that line. All of them face the coverage test.
What to Watch, and When
Three measurements will settle most of this.
The September 2026 monthly figure, published around October. Against a baseline of $500 million to $650 million a month in acquisition lending, a print near $1 billion confirms a pull-forward comparable to May and September 2025. Anything near baseline means the rush was rhetorical.
The fourth-quarter transaction data, published in the new year. The number to watch is not the multiple, it is the seller financing offer rate, currently 29 percent. If that falls, the 36-month seasoning and the shared cap are discouraging seller notes, which was the most predictable second-order effect of the rule.
The $3 million-plus deal count in fiscal 2027. If it drops disproportionately against the rest of the acquisition book, the diligence requirement and the coverage floor are binding. If it holds near 36 to 38 percent of dollars, where it has sat for three years, the market absorbed the change.
We will publish the comparison when the data exists, including where this piece got it wrong.
Frequently Asked Questions
How large is SBA acquisition lending?
Between a fifth and a quarter of net 7(a) dollars in each of the last seven fiscal years. Fiscal 2025 recorded 6,910 acquisition loans for $8.12 billion at an average of $1.18 million, and the first half of fiscal 2026 recorded 2,869 loans for $3.41 billion at $1.19 million.
How many acquisitions are above the $3 million Quality of Earnings threshold?
Measured on loan size rather than business purchase price, about 10 percent of acquisition loans carry roughly 36 to 38 percent of acquisition dollars. The share has risen every year since 2020. Note that the actual threshold is business purchase price net of appraised owner-occupied real estate, so loan size is a proxy rather than a measure.
Is the acquisition market shrinking?
Not as a share of SBA lending. Total 7(a) volume is down against a record fiscal 2025, with the decline concentrated in loans under $500,000, while acquisition lending held 25.7 percent of dollars through March 2026. In the broader broker-reported market, transaction volume is down roughly 10 percent year over year while median price is essentially flat.
Should a buyer try to close before 1 October 2026?
It depends which category the deal falls into, and the answer is not the same for everyone. A deal with heavy investor equity, projection-dependent coverage, or a price above $3 million is generally better off under the old rule. An established operator buying in the same four-digit industry group may be better off under the new one, because the Business Expansion lane carries a lower coverage floor and a waivable injection. Either way, the trigger is the date the SBA loan number issues, so confirm it with the lender in writing.
Will multiples fall after 1 October?
Nobody knows, and anyone saying otherwise is forecasting. The mechanism by which they might is clear: the coverage floor rises to 1.25x on historical earnings and projections cannot be used to reach it, which caps what trailing cash flow can service. Whether sellers accept a lower price or simply do not sell is the open question, and the first evidence arrives with the fourth-quarter data.
Why does the lender count matter?
Because 1,141 active 7(a) lenders is a thirty-year low, and more than half made five or fewer loans. The new rule adds fixed diligence cost per acquisition file. Lenders doing occasional acquisition work absorb that badly, which is likely to push more volume toward the specialists who already dominate the segment.
Sources:
U.S. Small Business Administration, 7(a) loan-level FOIA data file, March 2026 release; acquisition volume, threshold share and monthly series computed by Loan Analytics
U.S. Small Business Administration, Information Notice 5000-880695 and SOP 50 10 8.1, Appendix 15, effective 1 October 2026
U.S. Small Business Administration, SOP 50 10 8, effective 1 June 2025, change of ownership and equity injection provisions
U.S. Small Business Administration, 7(a) and 504 activity reports, fiscal year-end 2025
BizBuySell Insight Report, second quarter 2026, and 2025 Year in Review
IBBA and M&A Source Market Pulse Survey, first and second quarters 2026
DealStats Value Index, Business Valuation Resources, through fourth quarter 2025
Pepperdine Private Capital Markets Report, 2026 edition
Stanford Graduate School of Business Search Fund Study, 2024
Published lender rankings and participation counts for fiscal 2025 and fiscal 2026 to date
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