Los Angeles Small Businesses Face Steady SBA Lending Amid Shifting Policies and Wildfire Awareness

Key facts

• Los Angeles County saw 3,456 SBA 7(a) loans in 2024, with 1,254 approved so far in 2025.
• National 7(a) loan approvals fell 36% to 21,000 in the first five months of fiscal 2025 compared to the same period last year.
• Average 7(a) loan amount rose to $531,000 in 2025 from $477,000 in 2024.
• City National Bank became the nation's second-largest 504 lender in 2022.
• SBA introduced a 0.50% guaranty fee for fiscal 2026, up from 0% the previous year.
• SBA closed in the last quarter of 2025, stressing industry timelines.
• Non-citizen business-owners are now barred from SBA borrowing under recent eligibility changes.

Lending Volumes Dip Nationally but Show Local Resilience

The Small Business Administration’s 7(a) loan program, a cornerstone of small business financing, is experiencing a sharp national downturn even as Los Angeles County sees a modest uptick in loan activity. Data from MultiFunding shows that from October 2024 to February 2025, lenders approved $11.8 billion in 7(a) loans, down from $14.6 billion in the same period the previous year—a decline of about 20%. By February 2025, the SBA had approved 21,000 loans nationally, compared to 34,000 by February 2024, a 36% drop. In Los Angeles County, however, the picture is slightly more optimistic. According to SBA data broken down by congressional district, the county recorded 3,456 total 7(a) loans in 2024. So far in 2025, 1,254 loans have been approved, which, if the trend continues, would represent a slight increase over the previous year. Brian Pifer, vice president of innovation at the Sherman Oaks-based nonprofit Small Business Majority, attributed an early 2025 uptick in loan volume partly to tariff-related uncertainty, though he noted a subsequent decline over the past six months.

Larger Loan Sizes Mask Access Gaps for Micro-Businesses

While the number of loans has fallen, the average loan amount has risen significantly. The average 7(a) loan in 2025 is $531,000, compared to $477,000 in 2024. Pifer pointed out that this trend benefits larger businesses but leaves behind micro-enterprises that need smaller capital infusions. “The biggest access-to-capital-gap issues are in the smaller dollar loan sector,” he said. Loans between $50,000 and $100,000 are what most small and micro businesses typically seek, not the larger capital investment loans that dominate the current 7(a) portfolio. This disparity highlights a persistent challenge: under-resourced communities, immigrant-owned businesses, and cash-only enterprises often lack the banking relationships necessary to access SBA programs. Pifer noted that while the SBA’s microloan program is a viable option for some, many small business owners are instead funneled toward alternative lenders with high interest rates and undisclosed APRs. “There is a real cost to these alternative products,” he said, contrasting them with the lower-cost, regulated SBA loans.

Disaster Loans and Wildfires Boost Awareness Among L.A. Entrepreneurs

The January 2025 wildfires in Los Angeles County have significantly increased awareness of SBA disaster loan programs among local business owners. Pifer observed that businesses affected by the fires are now more likely to know about SBA services, and the widespread media coverage has educated a broader audience. “Probably anyone who’s followed that story might be more aware now of the SBA than they were before the wildfires,” he said. However, awareness remains low in immigrant communities and among non-English speakers, where trust in banks and lending institutions is limited. Pifer emphasized that these gaps persist despite the heightened visibility from the disaster. The SBA’s disaster loan program, alongside its 7(a), 504, and microloan offerings, is now a critical resource for businesses rebuilding after the fires.

City National Bank Expands SBA Lending Beyond Hollywood Niche

City National Bank, a Royal Bank of Canada subsidiary headquartered in downtown Los Angeles, has deepened its commitment to SBA lending as part of a broader strategy to diversify beyond its traditional entertainment and high-net-worth clientele. The bank became the nation’s second-largest 504 lender in 2022 and actively participated in the Paycheck Protection Program during the pandemic. Sam Benedum, who leads the bank’s business banking division, described the current SBA lending landscape as “steady,” with borrowers waiting for clarity on interest rates, inflation, and tariffs. Benedum noted that business acquisition has become the most common borrower profile for SBA loans, driven by an impending generational wealth transfer. “Generations look to either inherit or potentially exit those small businesses they’ve built over the last 15 years,” he said. City National positions SBA lending as part of a relationship banking strategy, offering advisory conversations that align product type—whether 7(a), 504, or SBA Express—with the borrower’s immediate needs and long-term goals.

New Guaranty Fee and Eligibility Changes Reshape Borrower Landscape

The SBA introduced a 0.50% guaranty fee for fiscal 2026, up from 0% the previous year, adding a new cost for borrowers. Benedum acknowledged that volatility in the fee structure has required the bank to be more dynamic in its engagements, sometimes pivoting from an SBA product to a conventional one. Meanwhile, recent eligibility changes barring non-citizen business-owners from borrowing have drawn sharp criticism. Pifer said small business owners and advocacy organizations are “appalled by the ruling,” warning that without access to low-cost SBA financing, these entrepreneurs will turn to predatory alternative lenders. The SBA’s closure in the last quarter of 2025 also stressed industry timelines, though Benedum noted that processing times have since stabilized and may even be slightly accelerated due to experience gained during the PPP era. For straightforward loans, the timeline from application to approval is roughly 60 days, with more complex transactions also typically closing within that window.

Outlook: Steady Demand Amid Uncertainty and Structural Shifts

Both Pifer and Benedum see the SBA lending environment as stable but cautious, with borrowers and lenders alike awaiting clearer economic signals. The rise in average loan sizes and the focus on business acquisitions suggest a shift toward larger, more established companies, while micro-businesses continue to struggle with access. The wildfires have brought renewed attention to disaster loans, but the exclusion of non-citizen borrowers and the new guaranty fee may dampen overall demand. Benedum emphasized that City National remains “industry-agnostic” in its business banking division, ready to support any small business in Los Angeles. The bank’s expansion since 2016 into a more holistic provider has been driven in part by its SBA offerings. Pifer, meanwhile, stressed the need for continued education and outreach to under-resourced communities, where the gap in awareness and trust remains wide. “If businesses don’t have access to reputable, low-cost financing options, they still need capital,” he said. “That need hasn’t gone away.”

The bottom line

• National SBA 7(a) loan approvals dropped 36% in early 2025, but Los Angeles County saw a slight increase in loan volume.
• Average loan amounts rose to $531,000, widening the gap for micro-businesses needing smaller loans.
• The January 2025 wildfires boosted awareness of SBA disaster loans in L.A., but immigrant communities remain underserved.
• City National Bank is expanding SBA lending beyond its entertainment niche, focusing on business acquisitions.
• A new 0.50% guaranty fee for fiscal 2026 and eligibility changes barring non-citizens are reshaping borrower access.
• SBA processing times have stabilized after a closure in late 2025, with most loans closing in about 60 days.