January 28, 2026

2025 Lessons and Reflections | LoL #17

Shane Pierson, Stephanie Dunn & Brian Congelliere

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2025 Lessons and Reflections — Key Takeaways & Deep Dive

The SBA just posted a record-breaking hundred billion dollars in government-guaranteed loans to small businesses. That number sounds like a win. But when you strip away the headlines and look at what actually happened in 2025 — the defaults, the borrower caliber shift, the MCA crackdown, and the entrepreneurial revolution reshaping American business — the picture gets a lot more complicated.

In this episode: The Lords come back from holiday break to break down 2025. Shane, Steph, and Brian each bring a different lens — Shane sees the rising defaults and credit tightening, Steph sees the macro shift toward an entrepreneurial economy, and Brian spots the operational patterns that made 2025 uniquely challenging for originators. They also get into how AI changed the game for small business owners and lenders alike, from building business plans on phone calls to sniffing out borrowers who let ChatGPT do their homework.

Key Takeaways

1. Record Volume, Rising Risk — The Real Story of $100 Billion

The headline number is staggering. A hundred billion in SBA-guaranteed lending in fiscal year 2025. Forty-five billion through the 7(a) program alone, reaching 85,000 business owners. Pre-COVID, that total was around $30-35 billion. The program has tripled in volume in just a few years.

But volume without discipline is just risk with a bigger balance. And 2025 showed the cracks.

As lending accelerated, the previous administration had opened up program access and reduced regulatory compliance requirements. Speed went up. Gates came down. And the natural consequence followed — more loans went to borrowers who couldn't manage the debt, let alone run the business. Default rates climbed right alongside origination numbers.

Shane's credit background made him see it clearly: when you increase speed and reduce oversight, risk increases. That risk cascaded through the system. Small business owners started defaulting. SBA lenders started having problems. Some big names in the space got consolidated, had portfolios sold off, or got gobbled up entirely.

"You got more lenders at the table throwing a whole lot more loans at small businesses... you increase speed and you reduce the regulatory compliance requirements. In order to actually lend that money out, you increase risk." — Shane, Lords of Lending Episode #17

Interest rates compounded the pressure. After years of cheap money, rate increases hit borrowers' pocketbooks hard. Businesses that penciled at lower rates suddenly had cash flow problems. The combination of thin deal structures and higher debt service created a wave of stress across SBA portfolios.

The lesson? Access to capital is only half the equation. The other half is whether the borrower can actually sustain what they're taking on.

2. The Borrower Caliber Shifted — And Originators Felt It

Brian noticed it first, and every originator who worked through 2025 probably felt the same thing: the borrowers looked different. Getting the same number of loans done required dramatically more effort. The quality of applications seemed to drop even as the quantity surged.

The recurring problems became a pattern. Tax transcript issues. Business valuations coming back low. Borrowers in MCA debt cycles they couldn't break. The SBA's mid-year decision to prohibit using 7(a) loans to refinance merchant cash advances — whether that was ultimately good or bad policy — created an immediate impact on the ground.

"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." — Brian, Lords of Lending Episode #17

Brian saw the downstream effect firsthand. Some borrowers got in under the MCA refinance deadline. Others didn't and are still trapped in the cycle — taking new short-term debt to pay off the last round because those payments are brutal. Meanwhile, MCA lending itself had a banner year in 2025, which raises a troubling question: how much of that volume came from business owners who could no longer access SBA refinancing?

The tightening that started mid-year was a response to the smaller loan defaults that were piling up. Smaller loans tend to attract a different caliber of borrower. The volume was there, but the quality wasn't keeping pace.

For originators heading into 2026, the takeaway is straightforward: vet harder. Ask better questions. Don't let volume goals override the signals that a borrower isn't ready.

3. America Just Went Through an Entrepreneurial Revolution

Step back from the lending mechanics and look at what drove that hundred billion dollar number. Steph put her finger on it: the United States just experienced the biggest jump in small business formation in American history.

Post-COVID, the American workforce shifted. Fewer people in big corporate jobs. Fewer in government. More in the entrepreneur segment. The biggest uptake in SBA borrowing came from businesses with fewer than five employees — startups, turnarounds, projection-based businesses. The types of deals that barely existed in SBA lending ten years ago are now a significant chunk of the pipeline.

"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." — Steph, Lords of Lending Episode #17

This isn't a blip. It's a structural shift in how Americans pursue economic opportunity. The corporate ladder dream is being replaced by the startup dream, especially among younger workers. And the technological infrastructure to support it — from cheap cloud hosting to AI-powered tools to 3D printers in the garage — means the barriers to starting a business are lower than they've ever been.

For the SBA program, this means demand will continue climbing. For lenders, it means the borrower profile is permanently changed. Fewer experienced operators buying established businesses. More first-time entrepreneurs building from scratch or acquiring small operations they plan to transform.

The opportunity is real. So is the risk. The franchise space has been a bright spot — proven concepts with built-in support systems that give credit teams something to underwrite. But the broader startup wave requires different evaluation frameworks. Can this person actually run a business? Do they understand what they're getting into? Or are they just running from a corporate job they hated?

4. AI Changed the Game — For Better and For Worse

Every member of the Lords team is using AI daily, and they're seeing it transform both sides of the lending table. Shane is teaching borrowers to use ChatGPT on 8:30 PM phone calls. Brian is building productivity systems that let him process more loans in the same hours. Steph is watching the industry data flow through AI-powered analysis.

The upside for small business owners is massive. AI reduces the knowledge gap between first-time entrepreneurs and experienced operators. It helps organize thinking, build business plans from conversational input, create marketing materials, handle customer service, and translate complex financial concepts into plain language.

Shane's favorite 2025 moments were two phone calls where he walked borrowers through ChatGPT for the first time. Months later, both were using it every single day across their businesses.

But here's the flip side. Brian — who understands AI deeply enough to build with it — can now spot instantly when a borrower has let ChatGPT write their business plan without any real thought behind it.

"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 ChatGPT put together some crappy business plan based on whatever it was trained on." — Brian, Lords of Lending Episode #17

Steph added the tell: look for the em-dash. If a business plan is full of em-dashes and overly polished language from someone who can barely describe their business on a phone call, you know exactly where it came from.

The real power of AI for borrowers isn't in generating documents to impress lenders. It's in extracting what's already in your head — the knowledge, the plan, the numbers — and organizing it into something coherent. Shane and Brian both do this with borrowers: record a phone call, transcribe it, and let AI organize the output into a business plan that actually reflects the borrower's thinking.

The ones who use AI as a translator and organizer thrive. The ones who use it as a homework cheat get caught.

What This Means for Business Owners

2025 proved that access to capital isn't the bottleneck anymore. The money is there. What's missing is preparedness.

If you're thinking about buying a business or starting one in 2026, the SBA lending year in review tells you exactly what to focus on. Come with real equity. Understand your cash flow projections — not because your lender told you to, but because your survival depends on it. Use AI to get smarter, not to fake competence. And if you're acquiring an existing business, demand a seller note. A seller who won't carry any risk in the transition is giving you critical information about what they think the business is actually worth.

The entrepreneurial revolution is real. More Americans are going for it than ever before. But the ones who will be standing in three years are the ones who treated business ownership like a serious financial commitment, not a lifestyle upgrade with borrowed money.

Frequently Asked Questions

How much did SBA lending grow in 2025?

The SBA extended approximately $100 billion in government-guaranteed loans during fiscal year 2025. The 7(a) program alone accounted for roughly $45 billion across 85,000 business owners. For context, pre-COVID SBA lending volume was around $30-35 billion annually, meaning the program has approximately tripled in size.

Why did SBA default rates increase in 2025?

Multiple factors contributed. Program changes reduced regulatory requirements and sped up approvals, which increased the volume of riskier loans. Interest rate increases put pressure on borrowers' cash flow. Deal structures got thinner — more leverage, less equity, less cash reserves. And the caliber of borrowers shifted, with more first-time owners and less experienced operators entering the market.

What happened with MCA refinancing through SBA loans?

Mid-way through 2025, the SBA prohibited using 7(a) loans to refinance merchant cash advances (MCAs). This created an immediate challenge for business owners trapped in high-cost MCA debt cycles. Some borrowers got refinanced before the deadline. Others were left seeking additional short-term debt to cover existing MCA payments, potentially deepening the debt spiral.

How should small business owners use AI in 2026?

Use AI as a knowledge amplifier, not a replacement for thinking. The most effective approach is to use it alongside your existing expertise — record conversations about your business, transcribe them, and let AI organize the output. Build customer service tools, automate intake, create marketing materials. But never submit AI-generated documents that don't reflect your actual understanding of your business. Lenders are getting increasingly skilled at spotting AI-fabricated business plans.

Ready to Take the Next Step?

The lessons from 2025 are clear: better-prepared borrowers get better outcomes. Our training covers everything from deal structuring to equity injection to the real patterns lenders look for in applications. Explore training options at learn.lordsoflending.com/pricing

This content is for educational purposes only and does not constitute legal, financial, or investment advice. Consult with a qualified attorney, CPA, and financial advisor before making business or financing decisions. Loan terms, rates, and programs are subject to change and vary by lender.