2025 Lessons and Reflections | LoL #17

[00:00:01] Steph: welcome back to Lords of Lending. This has been a while for us. We were off on holiday, vacation and back. It’s nice to be back in the saddle. Um, what we wanna do this episode is break it out into two parts. Our first conversation is talk about 2025, what we did, what we learned. Mistakes wins. And then think on right as we head into 2026 and we’re full on in 26 and we’re all busy, what our predictions are for 26 and uh, maybe some tips on what to avoid or what to take advantage of.

[00:00:36] Steph: So we’re gonna jump right in and talk about 25. I wanna tell you, I’m pretty excited about this new administration and I don’t wanna get into politics, but what I’m excited about is transparency. What I love about this administration is they just released the 2025 SDA annual report, which is pretty cool.

[00:00:54] Steph: You know, I wanna strip away all the fluff and just look at the data. ’cause you know, we’re data junkies and we like to look at the numbers. But then me personally, I like to also say, all right, what do the numbers mean? And try not to fall into the traps that the media’s trying to feed us, right? So what do they mean?

[00:01:10] Steph: And take a really objective look at. The pros, the cons, and the takeaways. So look at this guys. 2025 fiscal year SBA was a record year, and so we’re all, you know, jumping for joy because we’re excited and thrilled that this economy’s thriving small business community is thriving. The record year was a hundred billion in government.

[00:01:33] Steph: Guaranteed money was extended to small businesses, 45 billion was given to seven a. Small business borrowers that’s 85,000 business owners, which is absolutely phenomenal. I mean, you look at what that means in terms of the last 10 years, and that’s what we ask ourselves here on this, on this call and what we talk about every day amongst ourselves is, alright, what does that mean?

[00:01:57] Steph: A hundred billion dollars? Well, if you think about pre COVID guys, that number was about 30, 35 billion. So we’ve tripled our volume post COVID, and this is not including PPP or anything. This is just seven a 5 0 4 disaster relief, a hundred billion. So I mean, huge kudos to the administration. Huge kudos to all the lenders in the country that are out there every day in the trenches.

[00:02:22] Steph: Lending money to small business owners, so access to capital. Uh, check, right? We’re doing it. I think it’s on, it’s gonna continue to, to thrive, and business owners are, are looking at those business opportunities and businesses exchanging hands. So that’s all Great. So I would say you guys, let’s kind of strip it back and year in reflection what that means.

[00:02:45] Steph: So record number alum. Uh, you, the three of us, our phones were ringing off the hook this entire year. Feels like we, there was no break at all. It was constant, constant demand. Demand is through the roof. So let me open it up, Shane, we’ll start with you. Okay. So what’s your pulse on 25 Demand? What, what the demand was?

[00:03:09] Steph: Did the profile feel or look different? From a business owner perspective, like what did you see in 25? What’s your, what’s your recap if you would?

[00:03:19] Shane: Well, it’s interesting, I think our competitors, uh, in the SBA space actually tell an interesting story about the what has happened to small business owners, uh, because. Though though we’re just banks. Yeah. We’re throwing money at the table to help small business owners. When a small business owner starts having problems, the bank is usually the majority partner, if you will, on that balance sheet that is, is in bed on any of these, these loans that are being taken.

[00:03:45] Shane: So the, the idea of what equity is and debt and, and though we don’t have operational control. The moment a small business owner starts hurting, our portfolio starts hurting, right? So that the things start going sideways. If you look at the default rates that have happened over 2025, yes lending has increased dramatically, but so has how many loans have gone bad?

[00:04:07] Shane: So you got more lenders at the table throwing a whole lot more loans at small businesses. The previous administration had opened up the ability for our program in particular to have better access to helping small business owners. And with that better access, they also dropped some of the gates that stopped us from doing things quicker.

[00:04:26] Shane: And so you increase speed and you reduce the, uh, the regulatory compliance requirements. In order to actually lend that money out, you increase risk. Risk increase means you start taking on partnerships with small business owners. They can’t really figure out how to manage that debt, let alone run their business, and they start going bad.

[00:04:44] Shane: That waterfalls into SBA lenders starting to have problems, of which we had some big, big SBA lenders that started having problems last year that, uh, got consolidated, gobbled up portfolios sold off, things like that that, that I don’t think is done yet. You know, we’ll talk about that in the next episode, 2026, what happens both in industry and to the small business owner, and I feel like.

[00:05:06] Shane: That that interest rate rise started hitting everybody’s pocketbook. Small business owners had some problems. They start defaulting, even though 2024 was huge bottom lines for banks, people were killing it. SBA loans like you could shoot, shoot and fish in a barrel, and all of a sudden 25 hits credit guys start getting their, their frustrations up because they’re starting to see things go sour.

[00:05:28] Shane: Then there’s this fall off. So it’s interesting to be on the tail end of the fiscal year 2026, which is in that September period for SBA and what they’ve reported, and I’m, I’m wondering what just happened in the last quarter. Like we don’t have quite too much of that data in, in pocket yet to even get into, but that, that huge cycle and what’s, what’s flown is directly tied to what you can see in the media.

[00:05:51] Shane: From what Trump has done with the tariffs and the impact that has had for interest rates being as volatile for inflation, driving some of that interest rate up and down and everybody’s trying, it just seems like we’re always constantly late to the game. And even our data now though, it shows positive trends.

[00:06:06] Shane: I’m seeing, and this is maybe my credit crap, you guys know, every time we get on the phone I start doom and glooming everything that’s happening and I, I can see the doom. That’s behind a lot of this. Um, but it’s not the end of the world. When all is said and done, it opens up new opportunity in which I’m, I’m excited to talk about on next episode, but history, I, I have a hard time just letting it be or, or, or dissecting it.

[00:06:29] Shane: I wanna let it be and let’s focus on the future. That’s where my head tends to be. But Brian, what, what are you thinking, man?

[00:06:34] Brian: What I’m thinking is 2025 was interesting because it kind of seemed like we were kind of at the tail end of. Interest rates going up and then starting to come back down. And we started seeing a different type of borrower since interest rates had gone up. And so a lot of what I remember talking about in 2025 amongst ourselves and with other lenders as well, was that it was like, uh, it was much more difficult to get the same number of loans done because. We had, I don’t know if we had more hoops to jump through, but we had to get these borrowers qualified. And it seemed like the caliber of borrower that we were seeing for some reason, uh, shifted. Changed. And so in order to get these folks to get qualified for an SBA loan, it seemed to be a lot more difficult.

[00:07:37] Brian: And we seemed to run into a lot of the same problems, tax transcript issues. Um. Business valuations coming back low, that sort of thing. The one major hiccup, if you can call it a hiccup, whether it was good or bad, was MCA loans no longer being permitted as, uh, an eligible use for SSPA loans. So that definitely changed things for us.

[00:08:05] Brian: I, I don’t know if that was good or bad. I don’t know what that will, like you’re saying, Shane, it’s kind of too soon to tell with the data. Whether that will in fact, impact borrowers, um, and how it will, I was just doing some quick research and it seems like MCA lending or that short term type of lending actually had a banner year in 25, so I’m curious to what degree was that from people no longer being able to get SBA loans to refinance those or other loans and having to resort to then. Getting more short term debt to pay the previous debt and getting into that cycle, I ran into quite a few business owners myself that were in that cycle and right around the time when the SBA made that change. And so it’s tough to say, you know, I had, I had one borrower, several borrowers who we got in under the, under the deadline, others that we didn’t, and they’re still trying to figure things out, getting.

[00:09:10] Brian: More loans to pay the last ones just because those payments are so insane. So I, I think 25 and probably going into 26, like Steph, you were saying banner year for demand in SBA loans. But also with about halfway through the year we started tightening up lending maybe because there’s just so many loans coming in and we’re seeing.

[00:09:35] Brian: More defaults on the smaller stuff. Smaller loans tend to be a different caliber of borrower. There’s lots of, lots of insights and lots of different things that can come into play. But um, yeah, definitely a very interesting year looking back on it. And if I’m a business owner, I, I think looking at it, I’m thinking, okay, all of that happened.

[00:10:01] Brian: So now what? And. I think the, now what is kind of like some, what we had discussed with some of the folks on our podcast earlier in the year, they still gotta just go for it. But be mindful of some of these, um, some of these things that we’re talking about, some of these points we’re talking about.

[00:10:23] Shane: You know what I think about is the what? Go ahead, Steph. You got something?

[00:10:30] Steph: I was

[00:10:32] Shane: You’re all writing.

[00:10:33] Steph: Yeah, I was just thinking to myself, okay, why? Right, why? It’s always like the why. Like why, why did we have a record here? We can’t just say, well, you know, the government. Enhance the programs and the for the administration and is push and increase. We just now got an increase in manufacturing from 5 million to 10 million loan amount, so that really wasn’t what moved the needle in 25.

[00:10:58] Steph: What really moved the needle in 25? You know what I’m thinking? I’m thinking this, I’m thinking our country actually, we just lived it, has gone through a a, a new. We went through the industrial revolution. We just went through the entrepreneurial revolution and it was all the, basically the aftermath of COVID. So what happened was our American economy was, I would call it more traditional pre COVID. You know, people had corp, a lot of people had corporate jobs, a lot of people had government jobs. Uh, the private sector was a lot more divided, right? And, and then there was the small business sector or the entrepreneur sector, post COVID guys that there, there’s been a shift, less people, big corporate, less people in government and more people now in entrepreneur segment, small business ownership segment.

[00:12:04] Steph: And, and if you look at the numbers. That’s what the numbers reflect. You know, the biggest uptake in who borrowed the money was businesses with less than five employees, startups, turnarounds, projection based business like those were the biggest segments of of increase. So is the change here to say I think so.

[00:12:27] Steph: I think this is the New America guys. The New America is much more entrepreneurial now. And if you look at our kids and kids graduating from college. They’re much more entrepreneurial. It’s not the chase the corporate job dream anymore. It’s the start your own business dream. So our country’s gone through a shift now in chasing the American dream is now chasing the entrepreneurial dream.

[00:12:53] Steph: And so demand is gonna continue. We’re gonna see a lot more small startups. Startups like, look guys, I remember. Not ever really doing startups like it was. It was not really our small business lending space. We would always look for existing businesses, existing cash flow. Now it’s pretty common to see startups.

[00:13:18] Shane: well that could also be a symptom of where we tend to work. You think about the last, uh, gosh, I’ve worked at seven banks now and prior to the, the current place we work is the appetite for understanding how to underwrite them or interest in giving them a shot, wasn’t there? Um, but there is a huge market in it.

[00:13:37] Shane: Like our, we tend to lean in, we can look at the franchise concepts as one that. It tends to make a lot of sense. What, what is the backup to help, help that your numbers are actually gonna come through, not just a, I I like to make this type of burrito and now I’m gonna be a, a burrito Lord, running a, a burrito restaurant.

[00:13:53] Shane: Right? Like it’s what, what, what else out there has helped to prove your concept? And so the franchise space, I think has seen, has seen tremendous growth and the support for the franchise world has. Has done that as well in 2025 in particular, and you have a lot of lenders that’s to make that one of their heavy specialties, both banks and non-banks.

[00:14:11] Shane: And so yeah, I think that that, that weight definitely will carry forward. As we, as we look at what opportunities are there for people that want to get into small business ownership in general, like as the, the creativity and the opportunity is there. If the creativity is there, the opportunity will become present.

[00:14:31] Shane: That’s what I’m trying to say. Essentially, if you’ve got in, in your mind, if you can figure out how to come up with an idea to make money doing some service or selling some widget, if you’ve got your damn 3D printers, I’ve got two of them in my freaking garage sitting right next to me. Yes, I am recording in a garage.

[00:14:46] Shane: But the, uh, if you’ve got, if you’ve got a, a skill on how to do something, you can convert that really quickly now, and the operational infrastructure you can build. AI has done it. All three of us are on the phone every single day. I wake up at flipping 4 30, 5 o’clock in the morning and the first thing I can start thinking about is what can I build today with ai, as dorky as that sounds, my kids hate it, gives ’em cringe, but I think that that element is, is what the world is.

[00:15:11] Shane: You can advance a concept in an idea and make moves more rapidly now than you ever could have if you take advantage of what’s available and what really came to fruition this year. Right.

[00:15:20] Steph: So maybe that’s the perfect recipe, guys. Entrepreneurship has flourished post COVID because the shift in in American lifestyle patterns, number one was the catalyst, right? But then throw on technology, entrepreneurship now is realistic. It’s no longer pie in the sky. It’s so look at, I just looked up the growth rate.

[00:15:42] Steph: The growth rate post COVID of small businesses in America has been the biggest jump in American history post COVID. So this is the biggest jump in entrepreneurship in all of American history. So of course we’re gonna have record number of SBA loans and it’s gonna continue now ’cause it’s now the American entrepreneur spirit is alive and, and thriving. That’s exciting. That’s exciting. And I think AI is providing the support and the tools that we didn’t have access to before, and so that made it a lot more daunting. But with AI now and all the technological advancements just in the last 12 months, I mean, look what you could do to start a small business using ai.

[00:16:30] Shane: Or, or expand or grow it. Brian, this is gonna be right into our territory, brother, and I think. That, that it’s, it’s something relevant to do. ’cause my two favorite conversations I had with small business owners this year was at eight 30 in the evening time. And us getting on the phone and me showing them how to use chat, GPT, believe it or not.

[00:16:48] Shane: And, and I could, I could literally hear, ’cause it was just over the cell phone. I’m like, open up your, your browser. Let’s go to chat pt. It was like the most, it was, it was like talking to my grandma on both scenarios and by the time they were done, all of a sudden they’re like, this is the freaking coolest thing I’ve ever seen.

[00:17:03] Shane: This is gonna change my life. And I talked to them three or four months later. They’re like, Shane, I use it every single day. And on diff on all different elements. And what we were talking about doing was generating a business plan and those that, that don’t like, that, I like using AI for business plan.

[00:17:17] Shane: I’m sorry, but it is a way for people to solve little problems. You can’t, and I’ve even taught them, I’ve, I do these crash courses with the, the borrowers that work with me on the phone is. Not, it’s not gonna give you all the answers perfectly. You can’t trust this as perfect as the calculation of the calculator, right?

[00:17:31] Shane: Like that, that you had from back in high school. But it’s almost there and it has the ability to close gaps on understanding things that you don’t understand even that are coming outta my crazy mouth ’cause I talk too fast and whatever other reasons. In fact, both of them said that. They say, Shane, slow the hell down, like you talk way too fast.

[00:17:48] Shane: So I’m like, all right. Use CHATT as the translator health. Open it up as we’re talking. You can use your, your notes on your phone. Now. I showed them how to do that, transcribe our whole conversation so that when you go back and say, what was Shane trying to explain to me in normal terms? And boom, they got answers to it.

[00:18:04] Shane: So this is, this is a tool that’s available that that has now integrated in every corner of our life. You just have to turn the key and unlock it. Try to get explorative on how to and, and, and put it into your life. And when it comes to lending it, it could be the stop yap of, of helping a lender understand why the heck you wanna do the loan you’re doing.

[00:18:24] Shane: So if you’re wondering that light is from my AI screen over here doing its job in the background, I’ve got my screen flash and doing all of its things. It’s constantly working. So I, I think that all of us have that opportunity. And Brian, you’re, you’re the one that got me addicted to, to Claude code. What have you seen beyond digital?

[00:18:41] Shane: Just ai, just even other elements. What are you seeing to, to kind of finish up the thought on 2025 that, that we need to really take from and, and, and push this, these small businesses forward.

[00:18:53] Brian: The thing that I think is along the lines of what you’re saying, ai, you know, some people don’t like it. They think it’s a bubble. They think it’s not worth it, and to some degree there are aspects of it that are, I. Bubbly, but if you know how to leverage both your industry knowledge and the ability that AI gives you to expand that knowledge further and build on that knowledge and actually use that knowledge to. Move yourself, propel yourself forward at a much quicker pace than you otherwise would have. That’s where I think that AI gets you gains. That’s where you go from, you know, being able to process in our industry, being able to process, let’s say 10 loans a month, to being able to process 15 or 20 with the same number of hours.

[00:19:58] Brian: And as a small business owner, what I’m thinking. You’ve got to market your business. You’ve got to worry about sales, you’ve gotta worry about, uh, employees, all of these different aspects. How could you leverage what you have in your brain, that knowledge that you already have in your brain, and use AI to translate that into productivity gains.

[00:20:23] Brian: So many people when it first came out last year, the year before, you know, all these folks that I listened to or follow. They all started talking about, oh, I’ll build you a chat bot. I’ll build you a chat bot for your business, get a chat bot for your business. And is that really implementing ai? No, it’s not.

[00:20:44] Brian: It’s literally just using chat GPT as a forward facing widget on your website. But there are ways now to actually use it and. For example, taking your industry knowledge and creating a customer service rep for you that can work 24 7. Um, there are certain, you know, service-based industries, it’s a little tougher because you, the actual widget that you’re selling is going, for example, in a, an electrician going to a house and installing whatever it is you’re installing, doing the electrical work. But there are still aspects that you can use AI to help you out with, um, intake new customers. Again, customer service, that type of stuff. AI is always running. It’s

[00:21:40] Shane: Et cetera, et cetera, et

[00:21:42] Steph: No, no, no, no. Keep let him keep going.

[00:21:44] Brian: Um, yeah, what

[00:21:48] Shane: Et cetera,

[00:21:49] Brian: I just,

[00:21:49] Steph: where, where, where am I? Where?

[00:21:52] Brian: Did I just black out and.

[00:21:53] Shane: me of the episode of us inside the car when we were down in Florida.

[00:21:56] Steph: Me too.

[00:21:57] Brian: just blacked out and that just, yeah. I gotcha. I gotcha. I’ll stop there. I will stop there.

[00:22:06] Shane: I, I set him up so hard for that freaking

[00:22:09] Brian: is neat.

[00:22:11] Shane: It’s neat. It’s neat,

[00:22:13] Brian: AI is neat.

[00:22:14] Shane: It’s

[00:22:15] Brian: use it to benefit your business in 2026? Yes. And I think if you aren’t using it or you aren’t figuring out how you’re already behind.

[00:22:24] Shane: Well, now you know our hot topic for 2025, at least me and Brian, we tend to Stephanie’s using it every day too, but. It’s, it’s another element that I think pulls from the access to capital that existed in 2025 and that we saw literally explode. So I think that it can be a tool to help steer you into 2026.

[00:22:45] Shane: Uh, as, as a way to, to, I’m already seeing it with the way I’m getting applications, responses to questions. People are using it, getting more educated. It’s becoming a daily part of your life. It, it can be an accessible tool. We’re not an AI podcast, but we are seeing the benefits of it in our

[00:22:59] Brian: just, let me just add this too. As someone who understands now a lot more about AI, being familiar with it as a lender greatly enhances your ability to spot when people are BSing their applications with ai, you can look at it and go, oh, these guys literally put zero thought. Just had chat, GPT or whatever it is, Gemini or grok, put together some crappy business plan based on whatever it was trained on.

[00:23:34] Brian: And then they hand that in as if it’s gonna help out. And I’ve been able to at this

[00:23:40] Shane: Not a homework Cheat.

[00:23:41] Brian: Yeah, like cheating on your homework. Like, guys, this is too easy

[00:23:45] Steph: Yeah.

[00:23:45] Brian: spot.

[00:23:46] Steph: Yeah, but if, but it, but if you have to cheat too, it’s like, why do you have to cheat in describing your business? You should. It should be so easy that you could just describe it

[00:23:54] Brian: Right. Right.

[00:23:55] Steph: yeah. Yeah. So,

[00:23:56] Brian: thing, that’s another way that, like you were Sha San Shane, you were doing a business plan. I’ve done a business plan, several with borrowers where you extract the information from their brains that they have in just a short phone call. You record it on your phone, you take the transcript, pass it on to chat PT or whatever it is.

[00:24:17] Brian: Then you say, Hey, help me put this into, uh, comp, like a, an easily comprehendible business plan and it’ll do it.

[00:24:28] Shane: It’s just organization of data. It becomes a tool. But yes. Yeah, we we’re sniffing that garbage out left and right, right now to the point where it’s hard to read. Like I can’t, I won’t read it. I’m like, you know what? Just gimme the damn bullet points.

[00:24:39] Brian: Yeah.

[00:24:39] Steph: Well now, now I know what to look for is the M dash. Look for the M dash. And, and it’s funny ’cause the, there was a release in that annual report that had M dashes in it, and I was like, oh, no, no, no. Oh no.

[00:24:53] Shane: know the keystroke. They don’t know the keystroke like Brian does. You have to be an attorney to know that dumb keystroke.

[00:24:58] Steph: Yeah. All right. So to, so to sum up 2025, 

[00:25:03] Steph: banner year record, demand, continued growth. I wanna say the GDP is continuing to increase inflation’s coming down, jobs are up.

[00:25:15] Steph: So all in all, from a

[00:25:17] Brian: And rates probably continuing to come down.

[00:25:19] Steph: rates came down and will continue to come down. So all in all, guys, if you just take those data points. 2025 was a win. It was a win for the American economy. Okay, 2026, we’re gonna give our forecast. So we’re gonna, we’re gonna cover that in the next episode. So thanks again for tuning in.

[00:25:39] Steph: Follow us, like, subscribe and, and reach out in all the different formats that we’re on. And, uh, we’d love to do business with you. We’d love to continue to share our wisdom and expertise and maybe, maybe not all three of us, but. Some of us, and if you want the short answer, call Shane. If you want the long answer, you know who to call.

[00:26:00] Shane: I’ll say it so fast.

[00:26:01] Brian: If there was a

[00:26:03] Steph: you guys with the yin and the yang man, you can get the super short 

[00:26:07] Steph: Adam, you can get the super short or the super long, and I’m somewhere in the middle. So thanks again for tuning in. is, this is Your Lord’s the lending coming to you from now to about to head into 2026. See you later.