KBRA released research analyzing the small business lending (SBL) sector.
According to the research, Small Business Administration (SBA) loans are often considered an engine that funds small businesses in the U.S., with over $37 billion issued in fiscal year 2024 alone. However, various private sector capital sources play a critical role in the SBL sector, including asset-backed securities (ABS).
ABS has become an increasingly prominent asset class within the structured finance market, driven by strong demand for alternative capital sources, the rise of fintech originators and growing investor appetite for higher-yielding assets. Over just a decade, and excluding SBA transactions, KBRA has rated more than $14 billion in small business ABS in the U.S. Of these transactions, 71% were 144A transactions with published ratings (by volume), and 29% were private transactions with unpublished ratings. This report reviews issuance trends, collateral characteristics and credit performance across this universe of transactions.
Key Takeaways
- SBL ABS has become a more meaningful part of structured finance. Since 2014, KBRA has rated over $14 billion of small business ABS transactions, of which 29% were private ratings.
- Losses and delinquencies spiked in Q2/20 due to COVID-19 but normalized with lender relief measures and government support. More recently, performance has weakened slightly but is broadly consistent with pre-pandemic levels.
- Post-COVID originations reflect improvements in borrower profiles relative to pre-COVID originations, characterized by longer borrower operating histories, higher annual revenues, and guarantors with better credit scores. This shift has lengthened tenors and increased average loan balances for collateral in ABS transactions.
- KBRA has rated 71 SBL ABS transactions through August 2025, of which 38 are outstanding. Ratings remain stable overall, with 90% affirmations, 7% upgrades, and just 3% downgrades, which were mostly linked to COVID-era disruptions in a few platforms.
