Quarterly report
Lower middle market acquisition financing, FY2026 Q3
Every business acquisition financed with an SBA 7(a) loan approved between April to June 2026, counted from the federal loan-level record. 1,716 approvals, $2.0bn of loan capital, and a median loan of $706,800 at 8.75%.
FY2026 Q3 means April to June 2026. The SBA fiscal year opens on 1 October, so its third quarter is the spring, not the summer. A reader who assumes calendar quarters will date everything in this report three months late.
The quarter
Approvals by approval date. Section 03 explains why this report cannot count disbursements instead.
Approvals were down 2.6% against FY2025 Q3 and down 9.8% against FY2026 Q2. The year did not begin that way: fiscal 2026 opened with its weakest quarter in three years and has recovered through the spring.
| Quarter | Months | Approvals | Year on year | Loan capital | Median loan | Median rate |
|---|---|---|---|---|---|---|
| FY2025 Q1 | October to December 2024 | 1,743 | +37.6% | $2.0bn | $637,000 | 9.75% |
| FY2025 Q2 | January to March 2025 | 2,027 | +41.1% | $2.3bn | $641,000 | 9.50% |
| FY2025 Q3 | April to June 2025 | 1,762 | +15.8% | $2.1bn | $755,000 | 9.50% |
| FY2025 Q4 | July to September 2025 | 2,001 | +9.5% | $2.5bn | $795,000 | 9.50% |
| FY2026 Q1 | October to December 2025 | 1,153 | -33.8% | $1.4bn | $775,000 | 9.00% |
| FY2026 Q2 | January to March 2026 | 1,903 | -6.1% | $2.2bn | $709,300 | 8.75% |
| FY2026 Q3 | April to June 2026 | 1,716 | -2.6% | $2.0bn | $706,800 | 8.75% |
Source: SBA 7(a) FOIA loan-level extract, change-of-ownership approvals, FY2019 onward. Data as of 30 June 2026. n = 1,716 approvals in the quarter. Capital is approved loan amount, not purchase price.
The month that is not there
Why fiscal 2026 appears to have opened with a collapse, and why it did not.
The table above shows fiscal 2026 Q1 down 33.8% year on year, which reads as a market falling away. It is one month. October 2025 records no change-of-ownership approvals at all against 525 in the same month a year earlier. The federal government shutdown began on 1 October 2025 and the SBA cannot approve a loan while it is unfunded, so the programme simply stopped for the month.
| Month | Approvals | Month | Approvals |
|---|---|---|---|
| October 2024 | 525 | October 2025 | 0 |
| November 2024 | 472 | November 2025 | 538 |
| December 2024 | 746 | December 2025 | 615 |
Once October is set aside the two quarters are close: 1,153 approvals across November and December 2025 against 1,218 in the same two months of 2024, down 5.3%. November 2025 was in fact the stronger November of the two. The quarter did not lose a third of its volume, it lost a month, and nothing in the series since suggests demand went with it.
Approvals are counted by approval date, so a month with none is a month in which the agency approved none. It is not a gap in the extract: the file covers October 2025 and reports zero.
How to read an SBA quarter, and how to get it wrong
The most useful thing in this report, and the reason its headline differs from other people's.
The SBA extract records a loan when it is approved and updates it later when it disburses, cancels, pays off or charges off. Those later events take months. This file is as of 30 June 2026, the closing day of the quarter it reports, so almost nothing approved inside the quarter has drawn down yet.
| Quarter | Approvals | Disbursed | Approved, not yet drawn | Not yet drawn |
|---|---|---|---|---|
| FY2025 Q3 | 1,762 | 1,502 | 65 | 3.7% |
| FY2026 Q3 | 1,716 | 509 | 1,141 | 66.5% |
Counted on disbursements, this quarter would read as 66.1% down year on year. It is not. 66.5% of this quarter’s approvals are recorded as approved but not yet drawn, against 3.7% of the same quarter last year. That gap is the age of the file, not the state of the market. Netting out cancellations does not fix it either, because cancellations are recorded late as well. Approval date is the only basis on which two quarters inside one extract can be compared, which is why this report uses it and says so.
What was bought
Share of approvals in the quarter, by the seller's NAICS sector.
| Sector | Approvals | Share |
|---|---|---|
| Retail Trade | 282 | 16.4% |
| Accommodation and Food Services | 250 | 14.6% |
| Other Services (except Public Administration) | 214 | 12.5% |
| Construction | 162 | 9.4% |
| Health Care and Social Assistance | 161 | 9.4% |
| Administrative and Support and Waste Management and Remediation Services | 129 | 7.5% |
| Manufacturing | 126 | 7.3% |
| Professional, Scientific, and Technical Services | 117 | 6.8% |
| Wholesale Trade | 65 | 3.8% |
| Transportation and Warehousing | 58 | 3.4% |
17.1% of approvals in the quarter name a franchise. A franchised acquisition is a different transaction from an independent one, and the SBA records which.
Where
By the state of the business acquired, not the lender.
| State | Approvals | Share |
|---|---|---|
| TX | 190 | 11.1% |
| CA | 168 | 9.8% |
| FL | 149 | 8.7% |
| IL | 74 | 4.3% |
| PA | 71 | 4.1% |
| WA | 69 | 4.0% |
| MI | 66 | 3.8% |
| OH | 62 | 3.6% |
| CO | 49 | 2.9% |
| NY | 47 | 2.7% |
What the money cost
The median initial note rate was 8.75%, against 9.50% in the same quarter a year earlier. The median term was 10 years, which is the ceiling the SBA applies to a goodwill-only acquisition loan rather than a preference expressed by borrowers.
The spread matters more than the median. A quarter whose middle loan is $706,800 still ran from $275,000 at the lower quartile to $1,608,250 at the upper. There is no such thing as a typical deal at this size.
Who lent
334 banks approved at least one acquisition loan in the quarter.
The five largest took 27.1% of approvals between them, so this is a concentrated market at the top and a long tail underneath. For an owner, the practical consequence is that the lender who will look at a deal is often a specialist rather than the bank across the street.
| Lender | Approvals | Share |
|---|---|---|
| The Huntington National Bank | 187 | 10.9% |
| Live Oak Banking Company | 139 | 8.1% |
| First Internet Bank of Indiana | 48 | 2.8% |
| Byline Bank | 47 | 2.7% |
| Newtek Bank, National Association | 45 | 2.6% |
| Pathward National Association | 35 | 2.0% |
| Celtic Bank Corporation | 32 | 1.9% |
| Zions Bank, A Division of | 30 | 1.7% |
| Hanmi Bank | 26 | 1.5% |
| Truliant FCU | 26 | 1.5% |
What this report does not measure
It measures acquisitions financed with an SBA 7(a) loan. That is a real and unusually well documented slice of the lower middle market, and it is a slice. Deals done with seller paper, conventional bank debt, private credit or cash do not appear here at all, and the SBA programme has its own ceiling, so the larger the transaction the less of it this record sees.
Nor is a loan a purchase price. The figures above are approved loan amounts. A buyer puts equity in alongside them and a seller frequently holds a note, so enterprise value is higher than the loan by an amount this file does not state. Where multiples appear anywhere on this site they come from a separate announced-transaction set and are marked as such on the multiples page.
Full definitions, the change-of-ownership coding history and the reasons the series starts at fiscal 2019 are on the methodology page.
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