Despite a tough year, SBA's popularity with lenders endures

Core Insights - The Small Business Administration (SBA) continues to attract banks despite challenges such as a fee hike, increased problem loans, and a government shutdown [1][8] - Several banks, including Banesco USA and Atlantic Union Bankshares, are entering or expanding their SBA lending operations [2][5] Group 1: Bank Activities - Banesco USA has acquired a $95 million portfolio of SBA 7(a) loans from BayFirst Financial Corp and is hiring BayFirst's SBA lending team [3] - Banesco plans to service a $1.5 billion portfolio of third-party 7(a) loans, marking a significant entry into SBA lending [3][7] - Atlantic Union Bankshares aims to expand its SBA lending beyond its current eight-state footprint, combining capabilities from its acquisition of Sandy Spring Bancorp [5][6] Group 2: SBA Lending Program - The SBA 7(a) program provides loan guarantees ranging from 50% to 85% on loans up to $5 million, with approximately $120 billion guaranteed since October 2022 [4] - Despite a mid-year fee hike, SBA 7(a) lending volume remained strong, totaling $37.3 billion for the 12 months ending September 30, 2025 [11] - The SBA has faced credit-quality issues, leading to a series of fee waivers and discounts being eliminated [10] Group 3: Market Dynamics - BayFirst Financial exited SBA lending due to a spike in problem loans and reported an $18.9 million loss for the quarter ending September 30 [12][14] - Banesco aims to become the primary financial institution for SBA borrowers, focusing on larger-dollar deals compared to BayFirst's previous strategy [7][9] - Banesco's CEO is confident in matching or exceeding BayFirst's SBA origination levels, which approached $500 million annually before credit quality issues [9][15]