Original research

What SBA Debt Can Actually Support, by Asset Class: Loan Performance, Cap Rates and the 2026 Coverage Floor

The properties SBA treats as hardest to resell are not its riskiest loans. Self-storage, hotels and gas stations carry the lowest losses in the program; restaurants and fitness centers carry the most. What actually limits an SBA deal in 2026 is neither the asset type nor the appraisal. It is coverage arithmetic: at October 2026 rates, a 7(a) acquisition at 90% leverage needs an unlevered yield of about 11.8% to clear the 1.25x historical floor, and almost no SBA-eligible asset class trades that high. This flagship sets out the loan record, the pricing, the rules and the math for every major SBA asset class.

Current as of October 28, 2026. Built on SBA's public 7(a) and 504 loan-level data, October 2026 SBA pricing, and SOP 50 10 8.1 with Technical Policy Updates.

By David Jones, MAI, CCIM · SBA Feasibility Study LLC Research · Added October 26, 2026 · Updated October 28, 2026

The findings in numbers

The claim this report tests

A belief runs through SBA lending that special-purpose properties are the program's dangerous loans. Hotels, gas stations, car washes, bowling alleys, golf courses and marinas sit on SBA's limited or special-purpose list, carry higher equity requirements on 504 loans, and require going-concern appraisals by specialists. It is natural to assume they also lose more money.

The loan-level data do not support that assumption. On seasoned cohorts, hotels charge off at about one-third of the 7(a) program average, gas stations at less than half, and self-storage at less than one-tenth. The heaviest losses sit in restaurants and fitness centers, neither of which is on the SOP's example list. The special-purpose list predicts deal structure. It does not predict credit outcomes.

What the data do show is that two other variables dominate. The first is the loan program: 504 loans charge off at roughly one-quarter of the 7(a) rate in every sector, which means that choosing 504 changes the expected loss more than choosing the industry does. The second is whether real estate secures the loan and how long it amortizes, which is why the real-estate-anchored classes cluster at the low end of the loss table.

And in 2026, a third variable has overtaken all of them: the coverage floor. SOP 50 10 8.1, effective October 1, 2026, tests most change-of-ownership loans at 1.25x on historical earnings. At current 7(a) pricing, that floor implies a cap rate far above where these assets trade, so the price an SBA buyer can finance sits well below the price an appraiser will conclude. This report quantifies that gap for every major SBA asset class.

FY2026: a contraction year

FY2026 closed September 30, 2026 with 7(a) approvals of $32.43 billion on 56,130 loans, down 13% by dollars and 28.1% by count from a record FY2025, according to the Coleman Report. American Banker reported 504 dollar volume down 9% to $7.1 billion. For context, SBA's own FY2025 release recorded 77,600 7(a) loans for $37 billion and 6,750 504 loans for $7.8 billion.

Two forces hit at once. The 43-day government shutdown in October and November 2025 pulled loans into FY2025 and stalled the start of FY2026. And SOP 50 10 8, effective June 1, 2025, tightened equity and underwriting rules. Lumos Data's analysis of the first nine months of FY2026 found gross 7(a) approvals down 33.4% by count and 20.9% by dollars, to 40,824 loans and $21.8 billion, while FY2026 dollars remained 2.3% above FY2024. Every one of the 20 NAICS sectors fell by loan count, from utilities at −57% to arts and recreation at −21%. Because the shutdown and the SOP change overlap, the FY2025 to FY2026 change by asset class cannot isolate the effect of either one.

Credit performance has also turned. Lumos Data reports the trailing-twelve-month 7(a) default rate at 4.8% as of March 31, 2026, the highest since 2013 and about three times the 1.6% low of 2021, though still well below the 11.6% peak of 2010. By sector in the first half of FY2026, transportation and warehousing ran highest at 7.6% and health care and finance lowest at 3.6%. The SBA Loan Index, also built on the FOIA files, reports that 4.0% of FY2010 to FY2026 7(a) approvals were marked charged off as of March 31, 2026: 5.9% for loans under $50,000 against 0.7% for loans of $5 million and above. Loan size is one of the strongest predictors of outcome in the program, and the real-estate-backed asset classes in this report sit almost entirely at the large end.

Oversight has focused on lender type rather than industry. SBA OIG Report 26-14, published September 17, 2026, reviewed 11,068 loans totaling $9.5 billion made by Small Business Lending Companies between FY2016 and FY2023. Their default rate was 14.87% against 9.79% for other lenders, and their early default rate 5.38% against 2.62%. Two lenders produced 69% of the originations and 84% of the defaults. SBA responded that one large historical lender heavily influenced the combined figures. Neither the OIG nor GAO has published losses by industry since 2020, and SBA's own program performance tables report by program, not by NAICS. Industry-level evidence therefore has to be built from the loan-level files.

What SBA finances, and what it does not

SBA finances operating businesses. 13 CFR 120.110(c) makes ineligible passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with loan proceeds, except Eligible Passive Companies under 120.111. An Eligible Passive Company may hold the real estate only if it leases the property to an affiliated operating company, assigns the rents as collateral, and the operating company guarantees the loan or joins it as a co-borrower. Under 120.131, the business must occupy at least 51% of an existing building, or 60% of new construction with a plan to occupy more later. SOP 50 10 8 and 50 10 8.1 carry these rules forward.

This is why an SBA cap rate reference looks different from a general commercial real estate reference. Apartments, investor office and manufactured housing communities dominate institutional surveys but are almost absent from SBA's book. The SBA-relevant evidence is concentrated in operating-business real estate, where the cap rate is usually a going-concern rate and the income being capitalized belongs partly to the business.

Self-storage sits near the passive line but is financed in practice as an operating business: 1,126 storage loans were originated between FY2021 and FY2025. NAICS 531130 should contain storage operators, not pure landlords; a large count of non-storage lessors in that code is a data-quality signal rather than an eligibility finding.

The special-purpose list and what it triggers

SOP 50 10 8, effective June 1, 2025, reinstated the list of limited or special-purpose properties from SOP 50 10 5(I). A special-purpose property is a limited-market property with a unique physical design, special construction materials or a layout that restricts its utility to the use for which it was built. Copies published by certified development companies include amusement parks, auto service centers with pits and in-ground lifts, bowling alleys, car washes, cemeteries, clubhouses, cold storage where more than 50% of square footage is refrigerated, dormitories, farms and dairies, funeral homes with crematoriums, gas stations, golf courses, hospitals, surgery centers and urgent care facilities, hotels, motels and other lodging, marinas, mines, museums, nursing homes including assisted living, oil wells, quarries, railroads, sanitary landfills, sports arenas, swimming pools, tennis clubs, theaters, and vineyards and wineries. The list is illustrative, and SBA or the appraiser may classify other properties as special purpose.

The distinction matters because classification changes the capital stack. For 504 loans, special-purpose property raises the borrower's equity from 10% to 15%, in a 50/35/15 structure, and to 20% for a new business, in a 50/30/20 structure. Special-purpose businesses also require a going-concern appraisal by a state-certified general appraiser who has completed at least four going-concern appraisals of equivalent special-use property within the prior 36 months, prepared under USPAP and allocating value separately to land, building, equipment and intangibles. Because practice varies on self-storage, childcare, restaurants and fitness, the injection should be confirmed with the CDC before the capital stack is finalized.

The loan record by asset class

The table below combines our tabulation of SBA's loan-level files for FY2021 to FY2025 originations, as of March 31, 2026, with published seasoned-cohort loss analyses of the same files. Cancelled and never-funded loans are excluded, so counts run about 10% to 13% below SBA's gross approval totals. The 504 share is a share of loan count. Dollar totals are approximate, derived as count multiplied by average loan. Charge-off rates are 7(a) count-based rates on seasoned FY2010 to FY2019 approvals unless noted; adverse resolution adds liquidation and guaranty purchase outcomes on FY2010 to FY2021 approvals.

Three patterns stand out.

Real estate anchors the low-loss classes. The asset classes with 504 shares above 20% by count, including self-storage at 31.3%, RV parks at 28.6%, golf at 26.4%, marinas at 24.6%, skilled nursing at 24.2%, warehousing at 22.7%, car washes at 22.5% and hotels at 21.8%, all sit far above the program's 9.6%. They also carry average loans of $0.8 million to $2.5 million against a program median of $195,000. Large, real-estate-secured, long-amortizing loans to established operators are SBA's best credits, and the loss table reflects that more than it reflects any property characteristic.

Restaurants and fitness carry the losses. Restaurants are SBA's largest asset classes by count and its heaviest loss contributors, with combined adverse resolution of 11.08%. Fitness is 54% start-ups and charges off at about 11.6% on franchised loans. Neither appears on the SOP's special-purpose examples. Restaurants also generate about 56 jobs per $1 million of 7(a) capital, against about 2.5 for self-storage, which shows the tension between SBA's job-creation mandate and its credit outcomes.

The loan product matters as much as the asset. Car washes illustrate it most sharply: standard 7(a) loans charge off at 3.24%, while 7(a) Express loans charge off at 9.89%, because Express under-collateralizes a fixed-asset business. Fuel stations show the same pattern.

Where the published estimates disagree

Class-level loss figures are computed by private analysts from the same public files, and definitions differ: count versus dollar basis, funded versus resolved denominators, and FY2010 to FY2019 versus FY2010 to FY2021 cohorts. The disagreements are material and should be shown rather than hidden.

The hotel figures are consistent in direction: every estimate places hotels well below the 7(a) average. But the 504 hotel figure is a useful caution. Seasoned 504 hotel charge-offs of about 2.5% run above the 1.5% 504 program average, which means that within 504, hotels are not the best performers. SBA lodging lending is overwhelmingly franchised limited-service, and none of these figures should be applied to full-service hotels.

Timing and the maturing cohorts

Loss rates on recent loans are understated because loans have not had time to fail. The median charge-off arrives about four to five years after approval; the SBA Loan Index puts the median at 50 months. FY2022 and FY2023 loans therefore show artificially low loss rates, and any comparison of recent and seasoned cohorts should be read accordingly. We report seasoned cohorts as the basis for credit judgments and show recent cohorts only as maturing evidence.

Geography

Car washes are the only class with published state-level data: California (649 loans), Texas (612), Florida (364), Georgia (293) and Ohio (218) hold 43.9% of car wash loans from FY2010 to FY2026. For the 7(a) portfolio as a whole, FY2021 to FY2025 dollars are led by California ($23.8 billion), Texas ($16.0 billion), Florida ($12.6 billion), New York ($6.9 billion) and Ohio ($5.4 billion).

SBA pricing in October 2026

Base rates

The Federal Open Market Committee raised the federal funds target range to 3.75% to 4.00% on September 16, 2026, its first increase since 2023, and WSJ prime moved from 6.75%, where it had held since December 2025, to 7.00% on September 17. The SBA optional peg rate is 5.00% for October 1 to December 31, 2026. Since March 1, 2026, 7(a) variable loans may also be indexed to the 5-year Treasury, the 10-year Treasury or SOFR under Procedural Notice 5000-875051, with the maximum rate cap still applying. The 10-year Treasury stood at about 5.0% in late October 2026, near its highest level in nearly two decades.

SBA 7(a) maximum rates at a 7.00% prime

Market pricing on real-estate-secured 7(a) loans above $1 million to experienced operators typically runs prime plus 2.25% to 2.75%, or 9.25% to 9.75%. No dated survey of 7(a) spreads is published, so this is market convention. This report uses 9.50% as the base case and the 10.00% maximum as the stress case.

FY2027 7(a) fees took effect October 1, 2026 under Information Notice 5000-881797. The upfront guaranty fee on the guaranteed portion is 2% on loans of $150,000 or less, 3% on loans of $150,001 to $700,000, and on larger loans 3.5% on the first $1 million guaranteed plus 3.75% above that. Loans of $700,000 or less to manufacturers, food-supply-chain businesses and rural businesses carry no upfront fee. The annual lender service fee is 0.55%.

SBA 504 debenture rates through 2026

Effective rates include CDC servicing, the SBA annual fee and CSA fees, based on NADCO-published pricing. The October debentures priced at 5.85% (25-year) and 5.78% (20-year) before fees, against a comparable Treasury of 5.28%; the roughly 112 basis point difference between the debenture and the effective rate is the ongoing fee load. The 25-year pool was $457 million across 387 loans. For FY2027 the SBA upfront fee is 0.50% and the annual fee 0.203%, both waived for manufacturers, food-supply-chain and rural borrowers, whose October effective rate was 6.74% on the 25-year debenture.

The 25-year effective rate rose 125 basis points between March and October 2026, lifting the constant from 7.53% to 8.46%. On a $2 million debenture, that is about $18,600 more in annual debt service. One CDC publishes higher October effective rates of 7.211% (25-year) and 7.163% (20-year), apparently reflecting a higher servicing-fee assumption; the rate from the CDC handling the loan governs.

Mortgage constants

Expressed per dollar of total project cost, annual debt service is about 7.72 cents on a 504 stack with 10% equity, 7.30 cents with 15% equity, 6.87 cents with 20% equity, and 9.44 cents on a 90% 7(a) loan at 9.50%. Those four numbers explain most of what follows.

The rules that set the ceiling: SOP 50 10 8.1

SBA published SOP 50 10 8.1 on August 14, 2026, then superseded it before it took effect with *SOP 50 10 8.1, Lender and Development Company Loan Programs with Technical Policy Updates*, issued under Information Notice 5000-882227 on September 25, 2026 and effective October 1, 2026. NAGGL describes the new version as superseding the August text that never took effect. SOP 50 10 8 continues to govern files on the earlier side of the transition, but sources disagree on where that line falls: NAGGL reads it as loans receiving SBA loan numbers on or after October 1, 2026, while other readings of the notice key it to applications received by SBA on or after that date. Lenders with files in process should confirm the treatment in writing.

The provisions below are drawn from lender counsel, trade association and CDC reproductions of the SOP text, with page citations where those sources supply them. They should be confirmed against the SBA document before being relied on for a specific file.

Debt service coverage minimums

For changes of ownership, projections must be reviewed but cannot be used to meet the floor. Lender counsel Starfield & Smith reports one exception: for fully collateralized loans financing special-purpose owner-occupied property, lenders may use projections to satisfy coverage even where historical coverage falls short, provided the requirement is met within two years of funding. A seller note that is not on full standby counts in debt service, and an interest-only seller note is tested on an amortization of ten years or less.

Equity injection

A 7(a) start-up, defined as a business in operation for one year or less, must inject at least 10% of total project costs, which include all costs required to become operational regardless of the source of funds. For an Initial Acquisition, defined as a change of ownership producing a new majority or largest owner who was not previously an owner, or a buyer employed for fewer than 24 months, the 10% injection cannot be reduced or eliminated. For Owner Buyouts and Business Expansions the lender may reduce or waive it. ESOPs acquiring at least 51% are exempt, and cooperatives may not be waived.

Limited sources are capped. Seller standby notes, other standby debt and non-controlling minority investors with less than 20% ownership may provide, individually or together, no more than half of the required injection. Where the price exceeds the business valuation, the difference must be made up by equity. For 504 loans the injection remains 10% standard, 15% for a new business or a limited or special-purpose property, and 20% where both apply.

Quality of Earnings, valuation and appraisal

A Quality of Earnings report is required for Initial Acquisitions and Business Expansions where the business purchase price is $3 million or more, measured before buyer equity or seller financing and excluding owner-occupied real estate. Owner Buyouts, ESOP and cooperative transactions, and acquisitions of owner-occupied special-purpose property are exempt. The report includes a cash proof reconciling deposits to the income statement and tax returns for the trailing twelve months and the last two fiscal years, and its earnings figure feeds the coverage test. A buyer-commissioned report may be used if the lender's vendor reviews it; a seller-prepared report may not.

Where the business purchase price exceeds $350,000, or where buyer and seller are related, an independent business valuation from a qualified source holding an ASA, CBA, ABV, CVA or BCA credential is required, prepared for the lender, and total debt may not exceed it. The special-purpose going-concern appraisal requirement described above is reported as carried forward unchanged.

Maturity: the rule that moves the most money

Under Appendix 17, mixed-purpose loans use a weighted-average maturity, or up to 25 years where at least 51% of proceeds finance real estate, but that route is not available for changes of ownership, which generally carry a ten-year maturity on the business component. The September 25 technical update reportedly allows up to 25 years where an integral, owner-occupied special-purpose property is acquired with the business and real estate represents at least 85% of total project costs. The notice summary reportedly omits the 85% condition while the SOP text includes it, so the condition should be assumed to apply.

At 9.50%, moving from a ten-year to a 25-year amortization lowers the constant from 15.53% to 10.48% and raises supportable debt by about 48%. For a special-purpose acquisition, whether the real estate clears 85% of project cost is often the single most consequential fact in the file, and it is decided by the appraiser's allocation of value among land, building, equipment and intangibles.

Other changes that affect the capital stack

Personal financial statements must now be dated within 90 days rather than 120. Seller consulting is permitted for up to 24 months rather than 12. Seller notes become refinanceable after 36 months rather than 24. Earnouts are prohibited. 7(a) guaranty exposure no longer reduces 504 availability, which makes a 7(a) and 504 pairing more practical for acquisitions. The $16.5 million aggregate cap on 504 energy projects is removed, and 504 projects of $5 million or more face added third-party lender underwriting requirements.

The arithmetic: what SBA debt can support

Two formulas turn SBA terms into a test of value. The band of investment weights the mortgage constant and the equity dividend rate by their shares of the capital stack. The debt-coverage floor, coverage multiplied by loan-to-value multiplied by the mortgage constant, gives the lowest cap rate at which a loan of a given size can still meet the SBA coverage minimum.

Where a property's market cap rate falls below the floor, a loan at the stated leverage cannot be sized at market price. The maximum loan-to-value at the coverage minimum is the cap rate divided by the product of coverage and the constant. On 7(a) Initial Acquisition terms at 9.50%:

At 1.25x and 90% leverage, a 7(a) acquisition requires an unlevered yield on cost of 11.79% before fees. Limited-service hotels at 8.7%, Class A and B RV parks at 8.0% and self-storage in the 6.5% to 6.8% range sit 300 to 500 basis points below that floor. On 504 terms, by contrast, the floor falls to 8.39% for an existing special-purpose business and 7.91% for a special-purpose start-up, below the market cap rates for hotels, RV parks, owner-operated fuel sites, entertainment and skilled nursing.

The financing table by asset class

The table below sets out, for each SBA-eligible asset class, the 2026 small-asset cap rate range, a typical operating expense ratio, the band-of-investment rate on 7(a) and 504 terms, the debt-coverage floor, the sign of leverage, the equity injection and special-purpose status. Band-of-investment rates use equity dividend rates of 10% for real-estate-like assets (owner-occupied office and industrial, self-storage, childcare), 14% for operating special-purpose assets (hotels, RV parks, fuel, truck stops, car washes, marinas, assisted living) and 18% for high operating risk (restaurants, fitness, bowling and entertainment, golf, skilled nursing). These are underwriting judgments, not survey data.

Two readings matter most. On 7(a) acquisition terms, leverage is negative for nearly every class; only skilled nursing and small owner-operated leisure assets trade near or above the floor. On 504 terms, leverage is positive or neutral for the real-estate-heavy special-purpose classes that dominate the low-loss end of the loan record. The program with the lowest losses is also the program whose arithmetic still works.

Asset-class notes

Hotels

Hotels are the anchor of the SBA real estate book: roughly 25,000 7(a) loans and about $44 billion of principal since 1995, and the largest 7(a) industry by dollars. US Realty Consultants' mid-2026 survey, released October 1, puts the limited-service average cap rate at 8.7%, down 20 basis points, with a discount rate of 11.3%; broker data place economy and select-service at 9.5% to 10.5%. CBRE's 2025 sample of 2,216 hotels shows a 34.8% gross operating profit margin and a 22.8% EBITDA margin, implying an expense ratio of about 77% before reserve across all hotels, and lower for limited-service. Leverage is negative on 7(a) and positive on 504.

What the SBA hotel feasibility study must show. Revenue built from RevPAR against the competitive set, the full franchise fee stack and an imputed management fee, a 4% FF&E reserve, an appraiser's allocation that clears the 85% real estate test for 25-year amortization, and the gap between market value and the SBA-supportable price.

Gas stations, convenience stores and truck stops

Fuel retail is a gross-profit business: fuel was 65% of 2025 convenience industry sales but 38.8% of gross profit, so expense ratios on revenue are meaningless. Investment-grade convenience net leases price at 4.80% to 5.65% (The Boulder Group, Q3 2026), while owner-operated independents trade on EBITDA multiples near 8x, roughly a 12.5% yield. The net-lease rate is the wrong input for an SBA operating business.

SBA has no truck-stop code. Truck stops without a convenience store fall in 447190/457120; those with a store fall in 447110/457110 and cannot be separated from ordinary fuel stations without keyword searches of borrower and franchise names. No 2026 cap rate survey exists for independent travel centers; we underwrite 9% to 12%. Express loans to fuel stations perform markedly worse than standard 7(a).

What the SBA gas station feasibility study must show. Fuel margin normalized to the cycle, card fees on card-tendered sales, owner labor imputed, tank compliance and reserves loaded, and a going-concern value built from operator evidence rather than credit-tenant net leases.

Car washes

Car washes sit near the middle of the loss table at 4.56% seasoned charge-off and 5.4% adverse resolution, but the spread between standard 7(a) (3.24%) and Express (9.89%) is the widest of any class. There have been 568 car wash loans since FY2024, and the growing share of ground-up express tunnels raises the start-up mix. Net-lease car washes averaged 6.29% in September 2026, with weaker operators at 7.06% to 7.25%; going-concern values imply 8% to 12%.

What the SBA car wash feasibility study must show. A membership ramp reconciled to comparable sites, churn applied to the projection, water and sewer at the actual reclaim configuration, and first-year liquidity sized to the ramp shortfall that 504 rules require the borrower to cover.

Self-storage

Self-storage is the lowest-loss class in the program and carries the highest 504 share of the core classes. It also carries the most negative leverage: TractIQ reported a 6.79% median asking cap rate on October 7, 2026, and Marcus & Millichap a 6.59% average, both well below either program's floor. NAICS 531130 can also capture RV and boat storage, so class figures should be filtered by borrower name.

What the SBA self-storage feasibility study must show. A lease-up schedule with a matching reserve, property tax reassessed to the purchase or as-complete value, and enough equity to close the gap between a 50% to 52% supportable loan-to-value on 7(a) and the purchase price.

RV parks and campgrounds

RV parks carry a 504 share of 28.6% and a start-up share of 31.9%. Newmark's 2026 survey places Class A and B parks at about 8.0% and Class C at about 9.0%, applied after a $75 per pad reserve; listing-derived data average 9.7% across 9,614 parks and 11.3% for parks under 25 sites. The SBA requires that more than 50% of gross revenue come from stays of 30 days or less, so annual-heavy parks risk ineligibility.

What the SBA RV park feasibility study must show. The transient revenue share, utility capacity and septic and well permitting, an expense statement at 2026 cost levels, and whether the real estate clears 85% of project cost. As the worked example below shows, failing that test cuts supportable debt by about one-third.

Restaurants

Restaurants are the largest SBA classes by count and the largest loss contributors. Premium QSR ground leases priced at 4.85% to 5.25% on 15-year terms in Q3 2026, and Boulder's overall net-lease cap rate reached 6.92%, the highest in over a decade, but operating restaurants are valued on seller's discretionary earnings, not on real estate cap rates. Accommodation and food services run a 4.6% charge-off rate on FY2010 to FY2026 approvals in the SBA Loan Index.

What the SBA restaurant feasibility study must show. Prime cost and occupancy cost within sustainable ranges for the concept, and coverage that survives a realistic first-year ramp, because a restaurant has little margin to absorb an error in either.

Childcare and fitness

Franchised childcare charged off 2.6% on resolved FY2010 to FY2019 7(a) loans, and childcare real estate traded at a 7.29% median closing cap rate across 611 tracked sales in 2026 (branded 7.03%, independent 7.45%). Childcare is not on the SOP example list, so the standard 10% 504 injection applies unless the CDC classifies otherwise. Fitness is the opposite case: 54% start-ups, about 11.6% charge-offs on franchised loans, and NAICS 713940 mixes gyms with yoga studios, climbing gyms, ice rinks and racquet clubs.

Bowling, golf and marinas

These are small, real-estate-heavy books with 504 shares of 19% to 26% and average loans of about $0.83 million to $1.06 million. No published loss rates exist for them. Golf files must also clear the private-club rule, and marinas trade at 8% to 10.5% for small non-institutional assets.

Senior housing and skilled nursing

Both are named special-purpose types, with 504 shares of 16.4% (assisted living and CCRC) and 24.2% (skilled nursing). CBRE's H1 2026 survey placed core Class A assisted living at 6.5% and memory care at 8.0%, after declines of 28 and 24 basis points; non-core assisted living was 7.2% in H2 2025 and freestanding memory care 9.6% in April 2025. Skilled nursing was reported at 10.9% for core Class A, through secondary sources. Leverage on 7(a) is negative for assisted living and marginally positive for skilled nursing.

Warehousing, cold storage and data processing

General warehousing is a small owner-user book of 256 loans from FY2021 to FY2025, and NAICS 493110 mixes third-party logistics operators with owner-users. Cold storage counts as special purpose only above 50% refrigerated square footage, and its SBA volume is below publication thresholds. NAICS 518210, broadened in 2022 to computing infrastructure and web hosting, consists mostly of IT service firms rather than data center real estate and should not be presented as a data center asset class.

Three worked examples

Each example uses sourced cap rates and stated operating assumptions. The deals are illustrative and do not describe any actual property.

1. Limited-service hotel acquisition on 7(a), Initial Acquisition at 1.25x

Maximum annual debt service at 1.25x is $508,800. At 9.50% over 25 years (constant 10.484%), that supports a loan of about $4.85 million, within the $5 million 7(a) limit; at the 10.00% maximum rate, about $4.67 million. At 90% loan-to-cost, the project cost ceiling is about $5.39 million. Deducting the guaranty fee on the 75% guaranteed portion (3.5% on the first $1 million plus 3.75% above it, about $134,000) and $75,000 of closing costs leaves a maximum supportable price of about $5.18 million, an implied going-in cap rate of 12.27%.

The gap to market value is about $2.13 million of additional equity. At the market price, total equity is about $2.67 million, or 36% of cost, against the 10% minimum.

On 504, the same hotel is not coverage-constrained. At 1.15x, $553,043 of supportable debt service carries about $7.58 million of project cost on a 50/35/15 structure, more than the market value. The binding constraints become the appraisal and the 15% injection, and the 7% intangible component, about $512,000, requires a companion 7(a) loan or equity because 504 cannot finance intangibles.

2. Ground-up express car wash on 504, special-purpose start-up at 20% equity

At stabilization, coverage is not the constraint: revenue could fall about 24%, to roughly $1.52 million, before coverage reaches 1.15x. The binding constraints are the as-complete appraisal, the $1.2 million injection and the ramp. In year one at 55% of stabilized revenue, net operating income is $140,000 and coverage 0.34x, a shortfall of about $272,000 that the 504 rules, as reported, require the borrower to cover through demonstrated liquidity or a funded reserve.

The valuation check makes the same point from the other side. At an illustrative 9.0% going-concern cap rate, stabilized value is about $9.56 million against $6.0 million of cost. Capitalizing the same income at the 6.29% net-lease average would produce about $13.7 million, a figure that describes a leased-fee investment in a credit tenant, not an owner-operated start-up.

3. RV park change of ownership on 7(a), Initial Acquisition at 1.25x

Maximum annual debt service at 1.25x is $438,400. If the real estate clears 85% of project cost and the loan amortizes over 25 years at 9.50%, it supports about $4.18 million of debt. If the 85% test fails and the loan is held to a ten-year maturity (constant 15.53%), supportable debt falls to about $2.82 million, a 32% reduction.

In the 25-year case, the project cost ceiling is about $4.65 million. After a guaranty fee of about $115,000 and $60,000 of closing costs, the maximum supportable price is about $4.47 million, an implied cap rate of 12.26%. That is about $2.38 million below the 8.0% survey value and about $1.62 million below the Class C value. Of the required minimum injection of about $465,000, no more than half, about $232,000, may come from a full-standby seller note or minority investors. The remainder of the gap must be buyer cash or a price concession.

The lesson is consistent across all three examples. On 7(a) acquisition terms, the SBA-supportable price is roughly 65% to 75% of a survey-based market value for any asset trading below about 10.5%. Buyers in those classes should budget 25% to 40% total equity, or restructure the real estate through 504.

Lender behavior, 2025 to 2026

The Federal Reserve's January 2026 Senior Loan Officer Opinion Survey reported tighter C&I standards for firms of all sizes, unchanged demand from small firms, and generally unchanged commercial real estate standards with stronger demand. Banks also reported being less likely to approve loans to firms adversely affected by artificial intelligence. The July 2026 survey, released August 3, reported unchanged C&I standards, basically unchanged demand for C&I loans from small firms, and easier commercial real estate standards with basically unchanged demand, the most easing since early 2022 according to KPMG's reading. Only 4% of banks cited stronger C&I demand from small firms, against 16% for large firms. The October 2026 survey, the first after the September rate increase, had not been released at the time of writing.

Our reading is that the supply of SBA credit is intact and the tightening is rule-driven and rate-driven rather than appetite-driven: 1.25x historical coverage, non-waivable injection and Quality of Earnings requirements on one side, and 125 basis points on 504 since March plus 25 basis points on prime on the other. We expect the sharpest volume pressure on first-time acquisitions of service businesses with thin real estate, and relative strength in owner-occupied special-purpose projects on 504.

Ten SBA underwriting errors and the tests that catch them

What an SBA feasibility study should report

An SBA feasibility study that relies on a survey cap rate and stops at market value answers the appraiser's question, not the lender's. For every SBA acquisition or development, we report three values side by side: the market value at a sourced, size-appropriate cap rate; the SBA-supportable price at the SOP coverage minimum on the actual program terms; and the equity gap between them, with the sources that will fill it and the share that may come from limited sources.

Alongside those three values, the study documents the operating expense basis, including the imputed management fee, the replacement reserve and any franchise costs; the 85% real estate test and the resulting amortization; the special-purpose classification and its injection consequence, confirmed with the CDC; the asset class's loan record in SBA's own data; and the break-even result, the revenue decline or expense increase that takes coverage to the SBA floor and to 1.00x. For start-ups and 504 projects, it sizes the first-year shortfall that the borrower must cover.

The point of an independent SBA feasibility study is not to find a value that supports the loan. It is to show the lender, before the file reaches SBA, exactly how much debt the asset can carry under the rules that will actually be applied.

Method: how to rebuild these figures from SBA's files

SBA publishes six loan-level files on the 7(a) and 504 FOIA page at data.sba.gov: 504 FY1991 to FY2009, 504 FY2010 to present, 7(a) FY1991 to FY1999, 7(a) FY2000 to FY2009, 7(a) FY2010 to FY2019, and 7(a) FY2020 to present, with a data dictionary. The most recent files are dated June 30, 2026; the September 30, 2026 files, which close FY2026, typically appear about one month after quarter-end. Until then, any FY2026 asset-class figure covers nine months. The figures in this report rely on files as of March 31, 2026 for class-level counts and seasoned loss rates.

Four cautions apply. Rates computed on files released before the March 2026 refresh are not comparable with current releases, because workout codes have since been filled in back to FY2010. Sources disagree on whether 504 loans carry charge-off amounts in the public file, so 504 dollar loss should be checked against the data dictionary. Several NAICS codes mix unrelated businesses, notably 531130, 493110, 713940 and 518210. And classes with fewer than 30 to 50 loans should be suppressed rather than reported.

How to cite this report

SBA Feasibility Study, *What SBA Debt Can Actually Support, by Asset Class: Loan Performance, Cap Rates and the 2026 Coverage Floor*, current as of October 28, 2026, sba-feasibility-study.com.

Lenders, CDCs, appraisers, researchers and journalists may reproduce any table with attribution and a link to this page. We will refresh the loan record when SBA posts the September 30, 2026 files that close FY2026, and the pricing tables after each monthly 504 debenture sale.

This report is general market commentary and methodology, not an appraisal, a credit decision, investment advice or legal advice. Loan performance figures are computations from SBA's public loan-level data and published analyses of it; they are not official SBA statistics, and definitions vary across sources. SOP 50 10 8.1 provisions are summarized from lender counsel, trade association and CDC reproductions and should be verified against the operative SBA text. Rates reflect pricing as of late October 2026 and change monthly. Worked examples are illustrative and do not describe any actual property or loan.

Sources

• SBA 7(a) and 504 FOIA loan-level data, data.sba.gov
• eCFR, 13 CFR Part 120, Business Loans
• NAGGL, SBA Publishes SOP 50 10 8.1 with Technical Policy Updates, September 25, 2026
• Starfield & Smith, What the SOP Technical Policy Updates Actually Change for 7(a) Lenders, September 2026
• StatementsReady, New SBA Rules October 1, 2026: SOP 50 10 8.1 Explained
• SBA Office of Inspector General, Report 26-14, September 17, 2026
• Coleman Report, FY2026 SBA 7(a) results, October 13, 2026
• American Banker, SBA 504 volume, October 9, 2026
• Lumos Data, FY2026 7(a) analysis, July 15, 2026, and trailing default rate analysis, 2026
• SBA Loan Index, FOIA-based charge-off analysis, data as of March 31, 2026
• Growth Corp and SomerCor, SBA 504 debenture pricing, October 8, 2026
• Federal Reserve, Senior Loan Officer Opinion Survey, January and July 2026
• US Realty Consultants, Mid-Year 2026 Hotel Investor Survey
• LODGING, Profitability Under Pressure (CBRE Trends 2025 data)
• BVWire, Valuing an RV Park (Newmark 2026 survey)
• Marcus & Millichap, U.S. Self-Storage Outlook 2026
• TractIQ, self-storage cap rates, October 7, 2026
• The Boulder Group, Q3 2026 Net Lease Research Report
• B+E, NNN Car Wash Listed Inventory, September 2026
• Little Scholars RE, Childcare Real Estate Market Report 2026
• McKnight's Senior Living, CBRE Senior Housing and Care Investor Survey H1 2026
• CapTec, SBA charge-off analysis by industry, 2020 and later loans