By Vinil Ramchandran
Most business owners assume that the forces shaping business sales change slowly. In reality, the rules that influence who can buy a company, how deals are financed, and what buyers are willing to pay often shift quietly – long before most owners notice.
Over the past several months, a series of policy changes has begun to alter the M&A landscape. Individually, none of these developments drew much attention. Taken together, they may meaningfully affect buyer demand, deal structures, and valuations in the coming years, particularly in the lower middle market.
Below are three changes worth paying attention to:
Expanded SBA Lending for Manufacturing Acquisitions
In December, Congress passed the “Made in America Manufacturing Finance Act,” which doubles SBA loan limits for manufacturing businesses from $5 million to $10 million.
This is an important shift. For companies valued between $5 million and $15 million, the increased lending capacity may allow more well-capitalized buyers to participate in transactions that previously stretched the limits of SBA financing. This expanded lending capacity may lead to more demand from Buyers potentially driving up valuations for companies needing loans in the $5 to $10 million range.
Since I work on a lot of manufacturing deals, I expect to witness this change first-hand and see increased activity from Buyers for the right kind of manufacturing businesses.
Lower Interest Rates and the Cost of Capital
The Federal Reserve’s recent quarter-point reduction may seem modest, but it lowers the overall cost of borrowing across the lending environment, including SBA and conventional acquisition financing. While business acquisition loans are tied to the “prime” rate and not directly to the fed funds rate, there is an indirect relationship that eventually causes rates to go down especially if there are additional rate cuts in 2026.
For buyers, lower rates improve cash flow and return profiles. For sellers, this often translates into increased buyer confidence and improved deal economics. Even small reductions in interest rates can meaningfully affect debt service at the transaction level, particularly in leveraged acquisitions common in the lower middle market.
New Tax Law Changes Affecting Buyers and Sellers
The One Big Beautiful Bill Act, signed into law in July 2025, introduces several tax provisions that directly impact mergers and acquisitions.
Key elements include the permanent restoration of 100% bonus depreciation, the ability to immediately expense domestic R&D costs, and a return to an EBITDA-based calculation for business interest expense deductions. Together, these provisions improve after-tax returns for buyers, especially in capital-intensive industries.
For companies that qualify for the Section 1202 exclusion (QSBS – Qualified Small Business Stock), the Act makes it easier for sellers to keep more of the profit from a business sale. It raises the lifetime capital gains exclusion from $10 million to $15 million and introduces a graduated schedule based on how long you’ve owned the stock: 50% if held three years, 75% if held four years, and 100% if held five or more years. For owners of qualifying businesses, this can significantly increase after-tax proceeds from a sale.
What This Means for Business Owners
For business owners, these shifts don’t necessarily signal a need to sell, but they do suggest that the market environment may be evolving in ways that create new options.
Understanding how financing availability, buyer behavior, and tax treatment intersect can help owners make better long-term decisions, whether that means preparing for a sale in the near future or simply strengthening the business with an eventual exit in mind.
Because selling a business is a process that unfolds over time, owners who start planning early are often best positioned to take advantage of favorable conditions when they arise.
If you’d like to discuss how these changes may apply to your business or what buyers are currently focused on in the lower middle market, I’m always happy to chat. To have a confidential conversation about your situation, click here.
About The Author:
Vinil Ramchandran, Founder of Dream Business Brokers, is a Certified Mergers & Acquisitions Professional, Certified Business Broker, and Certified Business Intermediary with over 25 years of experience guiding business owners through value growth and exit readiness.