Why Small-Dollar SBA Loans Are Attracting More Startups in 2025

The Small Business Administration (SBA) has various loan programs that support entrepreneurs. Microloans offer business owners up to $50,000. The SBA 504 loan and the popular SBA 7(a) loan have maximum loan amounts of $5 million.  Despite these high loan amounts, small-dollar SBA loans are surging in popularity and attracting more startups in 2025. In fiscal year 2024, there were over 38,000 SBA-backed 7(a) loans under $150,000, totaling a whopping $2.7 billion, according to the SBA 2024 Capital Report. The report notes that the number of small-dollar loans has doubled since 2020 and increased by one-third from 2023.

Several factors have led to this increase. In this guide, we'll share why more startups are going after these small-dollar loans and what to consider if you're interested in securing financing from SBA loans to start a business.

Why Smaller Loans Are Surging in Popularity

Smaller loans from the SBA are increasing in accessibility and popularity for several reasons. Here, we break down what's driving the surge.

Streamlined Lending

Many entrepreneurs turn to SBA loans to start a business. Given recent SBA program reforms, lending from the agency has become more streamlined, making small-dollar loans more accessible. According to the SBA 2024 Capital Report, the agency implemented certain reforms in August 2023 that simplified lending criteria and underwriting for smaller loans, specifically those under $500,000. These changes made small-dollar loans under $150,000 more accessible.

In April 2025, new SBA changes were announced that lowered the 7(a) small loan threshold to $350,000, effective June 1, 2025. At the same time, minimum business credit score requirements increased from 155 to 165. Businesses that apply for loans up to $350,000 and meet the minimum credit score requirements may qualify for expedited processing.

Economic Landscape

The rock-bottom interest rate environment that was present in the early pandemic is long gone. In the past several years, there has been elevated and lingering inflation. As of September 2025, inflation was up 3% year-over-year, according to the most recent data from the Bureau of Labor Statistics (BLS).

Because of the economic landscape, the Federal Reserve hiked up the federal funds rate a couple of years ago. As a benchmark interest rate, the federal funds rate impacts the prime rate, which can then impact interest rates on borrowing products.  For most of 2025, the agency kept the federal funds rate the same. Only in the past couple of months has the Fed started to cut the federal funds rate.

A higher interest rate environment means that borrowing is more expensive. So, a business loan for start up companies would end up being more costly, due to the interest charges.

The loan amount also directly impacts how much interest accrues over the life of the loan. Due to higher interest rates, leaner capital structures can be more attractive, which helped drive the surge in small-dollar SBA loans. A lower loan amount can be more manageable and prudent in a high-rate environment. So, businesses have flocked to SBA loans to start a business or expand what they've built.

Behavioral Shifts

Micro-, small, and medium-size enterprises (MSMEs) are a major component of the U.S. economy, employing nearly six in 10 workers, according to the McKinsey Global Institute. 

Some small business owners have prioritized sustainability and staying lean over scaling at a rapid pace. In the years since the pandemic, there has been a surge in entrepreneurship and the creation of startups. Getting SBA loans to start a business can be helpful and securing smaller amounts may be easier.

How Lenders Are Changing the Landscape

Thanks to changes in SBA rules, the network of lenders has only grown and increased, according to the SBA 2024 Capital Report, which states:

“The Small Business Lending Company (SBLC) rule introduced the permanent Community Advantage SBLC license, for mission-driven nonprofit lenders, for the first time. That new license effectively made permanently the Community Advantage Pilot Program, which had provided an onramp to SBA for community lenders but faced growth limitations related to its temporary authorization. The SBLC Rule also reversed a 40-year moratorium on new, nonbank lenders' participation in SBA lending. As a result of these reforms, SBA has reenrolled 103 Community Advantage Pilot Program lenders, licensed 39 additional, new Community Advantage SBLC lenders, enrolled two new national nonbank SBLCs, and is reviewing more applicants to the SBLC program now.”

The report also notes that the surge in small 7(a) loans from banks, credit unions, and online lenders is due in part to factors cited by the SBA as borrower-friendly, including:

• Competitive interest rates
• Fee caps
• Long repayment terms
• Customer service
• Transparency

The increase in lenders has led to more accessibility and an increase in small-dollar loans. More lenders, more capacity to process applications. For those looking for SBA loans to start a business or grow their current business, use Lender Match to connect with potential lenders.

Benefits of Getting Small-Dollar SBA Loans to Start a Business or Expand

The surge in small-dollar SBA loans comes with numerous benefits that are appealing to startups:

• May be easier to qualify: Applying for an amount under $150,000 could make it easier to qualify for a loan. Generally, the higher the amount, the higher the level of risk. Requesting small SBA loans to start a business or expand one may be easier and expedited with SBA Express Loans.
• Lower collateral requirements: For some SBA 7(a) loans, there are no collateral requirements for loans under $50,000. If your loan is under $150,000, you may have lower collateral requirements compared to higher loan amounts.
• Helps cash flow: Getting SBA loans to start a business or scale up can significantly help your cash flow. You can use a 504 loan for fixed assets and 7(a) loans for equipment purchases, real estate, and refinancing business debt.

Smaller SBA Loans: What Small Business Owners Need to Consider

Small-dollar loans have increased in popularity and can be a great option for new businesses and existing ones. While these loans may be easier to qualify for due to the lower loan amount, you still must be creditworthy and meet the minimum eligibility requirements set by the lender and the Small Business Administration.

The fact is that some lenders may prioritize large loan amounts over small-dollar ones.  That could mean longer processing times or delays. Be aware that applying for SBA loans to start a business or expand your enterprise will require time and plenty of paperwork. Many lenders typically look at how long you've been in business, the company's annual revenue, and personal and business credit.

The key is to do your research, find the right loan product, and have a solid business plan. Doing so can ensure you use the funds to grow, and you can comfortably afford to repay what you borrow.

Final Thoughts

Getting a small business loan to start a business can be tough, which is why small-dollar SBA loans to start a business have been on the rise. Even if you have an existing business, getting small business loans can be difficult.

Going after small-dollar loans from an SBA-approved lender could be the jumpstart you need. There may be easier eligibility requirements, and you could secure the capital you need. With access to the right financing, you can support your business, remain lean, all while building for the future. Be sure to look into the type of SBA loan, your total startup costs, and your overall budget for repayment.

FAQs About SBA Loans to Start a Business

1. What is the 20% Rule for SBA?

The 20% rule set by the U.S. Small Business Administration refers to the agency's loan requirements. An individual business owner who owns at least 20% or more must provide an unlimited personal guarantee. That means that the individual is fully responsible for the loan in the event of default.

2. Do SBA loans to Start a Business Require Down Payments?

Many SBA loans to start a business require a down payment. One of the benefits of SBA-guaranteed loans is that they have lower down payment requirements. However, it may depend on the SBA-preferred lender and the borrower's financial profile.

3. What Type of Loan is Best for Small Business Owners?

The best loan for small business owners depends on your needs and business plan. You can look into SBA loans to start a business, term loans to grow your business, a business line of credit for flexible financing options, or a working capital loan to cover operating expenses.

4. What Are SBA Express Loans?

SBA Express Loans are a financing option that's part of the SBA 7(a) loan program. It allows certain lenders to use their own processes to approve a loan up to $500,000 without the SBA review. In exchange, the lender agrees to a smaller percentage guaranteed by the SBA.

5. Do SBA Loans Have Fixed Rates or Variable Rates?

SBA 7(a) loans can have either fixed interest rates or variable interest rates. If you want to apply for SBA loans to start a business or grow an existing one, the interest rates can vary based on the loan structure and the lender.

6. Can You Get an SBA Loan to Buy a Business?

It's possible to get an SBA loan to buy a business. One of the most popular loan programs for this is the 7(a) loan option, which allows business owners to receive funds for a change of ownership, whether it's complete or partial.

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