As of July 4, 2026, a qualifying business can now combine an SBA 7(a) loan with an SBA 504 loan for up to $10 million in government-backed financing — double the old $5 million cumulative cap. If you’re in manufacturing, construction, food production, or any capital-intensive business, that’s real money you couldn’t access a month ago.
Before you get excited about the borrowing capacity, get clear on what that loan actually does to your taxes. Most owners get this wrong in one of two directions.
The loan proceeds are not income
Borrowed money is not taxable. If you draw $2 million to buy a building or a fleet of equipment, that $2 million does not show up as revenue and you don’t owe a dime of tax on receiving it. I still get asked this every year, usually by someone nervous about a big number hitting their bank account. Relax — a loan is a liability on your balance sheet, not income on your P&L.
The principal payments are not deductible either
Here’s the flip side, and it’s the one that trips people up. Only the interest on that loan is deductible. The principal you’re paying back every month — the actual $2 million you borrowed — never becomes a tax deduction. You already got the benefit of that money (the asset, the inventory, the payroll it covered) when you spent it. Paying the bank back isn’t a business expense; it’s just moving cash from your pocket to theirs.
Where the real tax move is: stacking the loan with 100% bonus depreciation
If you use that new $10 million ceiling to buy equipment, machinery, or qualifying real property improvements, 100% bonus depreciation is permanent again — meaning you can write off the full purchase price in the year you place the asset in service, regardless of how you paid for it. Buy $1.5 million of equipment with SBA financing and place it in service by December 31, and you get a $1.5 million deduction this year even though you only put a fraction of that in cash out the door.
Run the numbers: at a blended 30% tax rate, that’s roughly $450,000 off your tax bill in year one — against maybe $150,000 to $200,000 in actual cash you put toward a down payment and the first year’s payments. On paper, that looks like a windfall. It isn’t, and here’s the blunt part: you took the full deduction in year one, but you’re still making loan payments for the next seven to twenty-five years, long after the write-off is gone. In those later years you have real cash going out the door for principal, with no matching deduction left to offset it. Businesses that don’t plan for that mismatch end up with strong tax years followed by a string of years where cash is tight and the tax bill doesn’t reflect it.
Who this actually helps
The prior $5 million combined cap mostly worked against businesses with real estate or heavy equipment needs — manufacturers, contractors, and logistics operators who blew through the ceiling on a single project. Under the new rule, a qualifying borrower can take up to $5 million through the 7(a) program and up to $5 million through the 504 program separately, rather than sharing one combined limit. Small manufacturers get an added benefit: they can already stack unlimited 504 loans project by project, and now they can layer a $5 million 7(a) loan on top of that.
If your business isn’t capital-intensive — a service business, a small retail shop, a solo practice — this change probably doesn’t move the needle for you. The math above matters most if you’re financing equipment, a facility, or a major expansion.
The bottom line
A bigger borrowing ceiling is a financing opportunity, not a tax strategy by itself. The tax benefit comes from what you buy with the money and when you place it in service — not from the loan itself. Before you go to a lender with this new limit in hand, get your depreciation schedule and your loan amortization schedule in the same spreadsheet. That’s the conversation that tells you whether this financing actually makes sense for your business, not just for your banker.
This post is for general informational purposes only and does not constitute tax, legal, or financial advice. Loan terms, depreciation elections, and tax outcomes depend on your specific facts and circumstances. Consult a qualified tax professional and your lender before making financing decisions based on this content. Geiger Tax & Accounting, Amityville, NY · (631) 532-5622 · info@geigertax.com.