Interest Rates & SBA Loans in 2026: The New Normal

2026-01-07

Let's talk about the elephant in the room: the cost of capital. The days of 3% interest rates are in the rearview mirror. In 2026, we are operating in a new normal where SBA 7(a) loan rates are hovering higher. Does this mean you shouldn't borrow? No. Leverage is still a powerful tool. But it means the unit economics of the franchise matter more than ever.

A business with thin margins (10-12%) might have worked in 2021; it won't work today because the debt service will eat all your cash flow. We need to find concepts with 20%+ EBITDA margins to safely service the debt and pay you. When I help clients navigate SBA lending, we are looking for 'Debt Service Coverage Ratios' (DSCR) of 1.5 or higher in the FDD.

We are also seeing a trend of 'Rollovers as Business Startups' (ROBS) as a primary funding vehicle. By using your own retirement funds tax-free to start the business, you lower your loan amount and your monthly burn rate. This 'equity-heavy' approach is the smartest way to launch in a high-rate environment. You aren't just buying a business; you are investing in an asset that you control, rather than the stock market.