That the nonbank channel underperformed banks by a wide margin, and that the newest loans were the worst. Across fiscal 2016 to 2023, SBLCs approved 11,068 7(a) loans worth $9,534,531,601.¹ As of March 31, 2025, their default rate was 14.97 percent against 9.79 percent for other lender types, and the rate peaked at 19.69 percent versus 12.78 percent over the period.¹ The early default rate, measured within 18 months of disbursement, was 5.38 percent for SBLCs against 2.62 percent for other lenders.¹ For loans approved in fiscal 2022 and 2023, the years right after the license moratorium lifted, the SBLC default rate as of September 30, 2025 was 4.56 percent versus 1.90 percent for other lenders, again more than double.¹ Inc. and Funder Intel both draw on this report, though Inc.'s write-up cites a marginally different portfolio default figure; the numbers here are taken from the OIG report itself.^{3 4}

Almost entirely in two firms. The OIG found that two SBLCs originated and disbursed 69 percent of SBLC loans, about $5.7 billion, yet accounted for 84 percent of the defaulted loans and 88 percent of the early defaulted loans.¹ That is the number that should change how a reader reacts: the channel-wide 14.97 percent is not a uniform problem across 16 licensed nonbanks, it is heavily concentrated in a small number of originators.^{1 4} The report does not name the two firms, and neither does the trade coverage, so any attribution circulating elsewhere is unverified.⁴

The examinations stopped. The SBA's Office of Credit Risk Management typically runs safety and soundness examinations of each SBLC at least once every 24 months, but it has not done so since April 4, 2023, which the OIG attributes to contractual issues.¹ That pause overlapped with expansion: the agency lifted a moratorium on new SBLC licenses on April 12, 2023, taking the count from 14 to 16 by April 5, 2025.¹ The pause was not the whole problem: the OIG found that even where OCRM did review SBLCs, these lenders continued to show repeated categories of deficiency, and its monitoring was not sufficient to ensure they implemented corrective actions to prevent similar future loan deficiencies.¹ The report makes three recommendations, to analyze the root cause of the underperformance, to modify OCRM's procedures so SBLCs implement corrective actions, and to assess the risk of not running safety and soundness exams; SBA management largely disagreed with the draft but agreed with the first and third and partially with the second, and the OIG says the planned actions satisfy the intent of all three.¹

Because the borrowers overlap. A 7(a) loan is not your product; it carries a government guarantee, a multi-year term, and SOP-driven underwriting. But many small businesses that hold an SBA loan also carry a merchant cash advance, a factoring line, or an equipment lease, and 7(a) proceeds are often used to refinance that short-term debt. When an SBA loan enters liquidation, the SBLC's secured lien collects against the same receivables and assets a funder advances against, so a default wave concentrated in a few originators changes the recovery order on merchants you may already fund. And this one is concentrated and real, not a one-lender artifact: SBA management argued that a single SBLC drove the rates and that excluding it the rest outperformed the overall 7(a) portfolio in fiscal 2016 to 2019, but the Inspector General rejected that, finding two firms behind more than 80 percent of the defaults and early defaults and the SBLC rates still higher than the 7(a) portfolio even after excluding that lender in fiscal 2022 and 2023.^{1 3}

Read the primary file, then test your own book. OIG Report 26-14 is public on oversight.gov and downloadable, so anchor any internal memo on the report rather than a summary.^{1 2} Flag SBA 7(a) lenders in your UCC searches at underwriting and at renewal, and watch for liquidation activity on merchants you have already funded, because an SBLC in workout is collecting against the same receivables and collateral you advance against. Track first-18-month performance by origination cohort, not just lifetime default rates, because the newest SBLC vintages, the 2022 and 2023 loans booked after the moratorium lifted, defaulted at more than double the rate of other lenders.¹ Watch whether OCRM restarts safety and soundness examinations, which is the forward story here.¹ And treat the $1.3 billion as exposure in workout, not a booked loss: liquidation begins after default when a loan is judged unlikely to return to regular payment, and recoveries can still come from collateral, guarantees, and settlements.^{1 3}

What the record does not yet show: which two SBLCs drove the defaults, since the OIG did not name them; the recovery rate on the $1.3 billion in liquidation; whether OCRM has set a date to resume safety and soundness examinations; and how the two outlier firms will be handled going forward. The channel-wide default figures are a snapshot as of March 31, 2025, and the newest-vintage figures as of September 30, 2025, so they describe a trend and a process, not the current quarter.^{1 3 4}

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Oracle sent a force majeure notice on September 24 tied to the New Mexico portion of its $165 billion Stargate data-center campus, which spans Texas, New Mexico, and Ohio.^{5 7} Blue Owl Capital financed part of the development, so the notice lands on its lender.⁸ CNBC and Bloomberg describe it as a contractual step, not a cancellation: Oracle stays the lead tenant, and the notice lets it delay payments and extend the lower development-stage rent if the site misses its 2028 target, after permitting and a gas-pipeline delay of about six months to February 1, 2027.^{5 6} Blue Owl is a large infrastructure and corporate private-credit manager, not a merchant cash advance, factoring, equipment, or revenue-based funder, so the read for nonbank lenders is capital-markets backdrop rather than a direct funder event: private credit is where much warehouse and forward-flow capital originates, and a visible stress point there can move its cost.⁸ The lesson is documentation, because a force majeure clause turned a financing presented as investment-grade-like into a live contingency the moment a physical dependency slipped.⁵

Zaria, a servicer for asset-backed and structured-finance lenders, has applied to the Office of the Comptroller of the Currency to charter Zaria National Trust Bank, with the OCC receiving the application in late July and a public comment period running to August 31.^{9 11} Co-founder and chief executive Emily Barron is leading it, and on approval Zaria would seek to merge its servicing affiliate into the bank.^{9 12} The proposed services matter to direct lenders: corporate trustee work for asset-backed securities and collateralized loan obligations, agency services for credit facilities, combined loan servicing and collateral management, and backup servicing with same-day transition if a primary servicer defaults, with real-time rather than end-of-period collateral monitoring.^{11 12} It is an application, not an approval, and the broader charter-rush theme is crowded, but the substance is on point after a week of nonbank loan-performance news: backup servicing and collateral monitoring are exactly the plumbing a warehouse lender or forward-flow buyer leans on when a book starts to deteriorate.^{10 11}

Powersports financiers are increasingly underwriting on cash-flow and alternative data rather than FICO, Auto Finance News reports, with about 45 million Americans unscorable by conventional models.¹³ Horsepower Financial Services, which leases motorcycles, off-road vehicles, and side-by-sides, does not qualify applicants on FICO at all; it uses about 300 data points and cash-flow signals such as the frequency of direct deposits and gig or secondary income, and says it approves roughly 40 percent of what the highest credit tiers would want, a figure that is the company’s own self-report.¹³ Its Revvable partnership routes applications through a tiered sequence, from traditional financing down to a no-FICO lease.¹⁴ Origination growth on this model still needs committed capital behind it: in August, Horsepower secured a $50 million credit facility from Coromandel Capital for new lease originations.¹⁵ For equipment and working-capital funders, the practical questions are whether cash-flow data belongs as a primary underwriting input for thin-file borrowers, and how a no-FICO book performs after eighteen months, the same early-default window the SBA report flags.^{13 15}

_{Sources
1 SBA Office of Inspector General | Small Business Lending Companies' Performance in the 7(a) Loan Program and SBA's Oversight, Evaluation Report 26-14, September 17, 2026
2 Oversight.gov | Report page, Small Business Lending Companies' Performance in the 7(a) Loan Program and SBA's Oversight (Report 26-14)
3 Inc. | SBA Loan Defaults Surged at 2 Nonbank Lenders. $1.3 Billion Entered Liquidation, September 24, 2026
4 Funder Intel | Two SBA Nonbank Lenders Drove Most Defaults as OIG Questions Years of Oversight, September 2026
5 CNBC | Oracle sends 'force majeure' notice about data center project, September 24, 2026
6 Bloomberg | Oracle Cites 'Force Majeure' to Shield Itself on Controversial Data Center, September 24, 2026
7 TechCrunch | Oracle sends force majeure notice on its New Mexico Stargate data center, September 24, 2026
8 24/7 Wall St. | Bad News Keeps Piling Up For Blue Owl, As Oracle Sends Force Majeure Letter To Lender, September 24, 2026
9 PYMNTS | Zaria Aims to Bring National Trust Bank to Structured Finance Markets, September 2026
10 American Banker | Asset-backed loan servicer Zaria asks for trust bank charter, September 2026
11 The Fintech Times | Zaria Files OCC Application to Charter National Trust Bank, September 25, 2026
12 Zaria via PR Newswire | Zaria Files Application with the OCC to Charter Zaria National Trust Bank, September 2026
13 Auto Finance News | Credit data beyond FICO gains traction with powersports lenders, September 24, 2026
14 Powersports Business | Horsepower-Revvable partnership creates lending alternatives, April 22, 2026
15 citybiz | Horsepower Financial Secures $50 Million Credit Facility From Coromandel Capital, August 2026}