1 in 6 Small Business Administration Loans Fail, Study Finds

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Study: 1 in 6 SBA Small-Business Loans Fail

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Loans backed by the U.S. Small Business Administration’s 7(a) program are the gold standard for Main Street entrepreneurs seeking cash to start a business or grow. The loans are coveted for low interest rates and long repayment terms, and are highly competitive. The application process is time-consuming, and applicants often walk away empty-handed.

Getting one of these SBA-backed loans, however, is no guarantee of success: More than 1 in 6 loans (17.4%) awarded from 2006 through 2015 went into default, which in this analysis means that the issuing lender determined that it wasn’t likely to be repaid, a recent NerdWallet study shows.

That’s an improvement from the default rate for the 10-year period ending in 2008, when nearly 1 in 4 (24.7%) SBA loans weren’t paid back. But still worse than the 10-year default rate ending in 2000, when slightly more than 1 in 10 loans (11.5%) went bad, the data analysis found.

The findings emerge from an analysis of over 1 million loans issued since 1991 by banks participating in the SBA’s flagship loan program. To understand how SBA 7(a) loans fail over time, NerdWallet calculated the percentage of defaulted loans in a series of 10-year periods, starting from the fiscal years that covered 1991 through 2000, through the 10-year period ending with the fiscal year for 2015. NerdWallet obtained the data from the SBA.

Loans took 4.7 years, on average, to fail

Data from 2016 and 2017 were excluded from the analysis because the loans are too new for meaningful default rates — the average failing loan took 4.7 years to default; the median failure time was 4.1 years, according to our research.

This report focuses on the small businesses that attracted the most SBA loans and what kinds of businesses had the best and worst rates of loan defaults.

The data show the chaos that led to the Great Recession, echoed in high default rates for loans to real estate-related businesses. Mortgage and other loan brokers had the worst default rate with nearly 2 in 3 loans failing (65.6%) from 2006 to 2015. This default rate was followed by residential property managers (46.2%) and real estate offices of agents and brokers (45.5%), the analysis found.

In all, NerdWallet found that loans to 221 kinds of businesses that received 200 loans or more during the 10-year period went to debt collection at rates higher than average (17.4%), including loans to debt collectors themselves — 25% of collection agencies defaulted on their loans from 2006 through 2015. The businesses with the lowest rate of defaults over the same time period were breweries (3.9%), businesses that support oil and gas operations (4%) and veterinary services (4.3%).

A key funding source for U.S. small businesses

Small businesses created 60% of the nation’s new jobs from 2009-2013, according to the SBA, and the 7(a) loan program is designed to stoke that economic engine by supporting those who are starting a business or expanding one. The program backed $24.1 billion in loans in 2016, up from $14.5 billion in 2006.

The SBA doesn’t make the loans; rather, banks and other financial institutions choose the businesses to fund as long as they meet 7(a) loan eligibility requirements. In return, the SBA guarantees to pay participating banks 85% of unpaid loans for $150,000 or less and 75% of unpaid loans for over $150,000.

The 7(a) program guarantees loans of up to $5 million made for working capital, company expansion or equipment purchases. The program is designed to pay for itself — fees paid by participating banks are used to cover SBA guarantees on loans that go bad.

The SBA guarantees allow banks to charge interest rates far lower than the rates entrepreneurs will get from online small-business lenders or by using credit cards. SBA loan interest rates range from 6.5% to 9%, and the loans have long repayment terms, ranging from 7 years for working capital loans to 25 years for real estate loans, according to the SBA.

Other funding options like online small-business loans have an average APR of about 50%, according to a NerdWallet analysis. And merchant cash advances have APRs as high as 350%, with repayment terms measured in months rather than years.

Default picture improving, but not for all

Banks primarily look at the financial health and credit history of the business and its owners when considering a loan application, no matter the industry. But when loan approval and default rates are examined by specific business types, some clear winners and losers emerge.

To understand defaults by industry, this data analysis eliminated business categories that recorded fewer than 200 loans in total from 2006 through 2015 (306 kinds of businesses received 200 or more loans).

Default rates were under 15% until the 10-year period ending in 2005, when the percentage of failed loans began to climb, peaking at 24.7% in 2008. The 17.4% rate of failed loans recorded in the decade ending in 2015 was the lowest since 2005 (17.3%).

Other key findings

Consumers move toward online services and shopping. The trend appears to have hit businesses like videotape and disc rental stores, which saw 42.7% of loans go into default from 2006 to 2015, along with travel agencies (39.4%) and bookstores (31.4%).

Brick-and-mortar stores struggle. When looking at 221 businesses with higher than average default rates, different categories of stores appear under pressure as consumers turn away from visiting department stores (40.6% defaulted from 2006 through 2015), women’s and men’s clothing stores (33.6% and 32.9%, respectively) and shoe stores (31.6%).

Health care providers appear to be doing well. Loans to optometrist (4.9%), dentist (5.2%) and physician offices (5.6%) from 2006 through 2015 had some of the lowest default rates, as did loans to pharmacies (5.3%) and home health care services (8.8%).

20 business types* with the highest SBA loan 10-year default rate (2006-2015)

Business**

Number of loans 2006-2015

10-year default rate

1. Mortgage and nonmortgage loan brokers

948

65.6%

2. Residential property managers

889

46.2%

3. Offices of real estate agents and brokers

2,638

45.5%

4. Multifamily housing construction

701

42.8%

5. Videotape and disc rental

232

42.7%

6. All other support activities for transportation

580

42.1%

7. Nonresidential property managers

338

42%

8. Window treatment stores

233

41.6%

9. Department stores

291

40.6%

10. All other support services

1,196

40.5%

11. Offices of real estate appraisers

354

40.4%

12. Travel agencies

376

39.4%

13. Cut and sew apparel contractors

242

38.8%

14. Jewelry, watch, precious stone, and precious metal merchant wholesalers

560

38.2%

15. Computer and computer peripheral equipment and software merchant wholesalers

337

37.1%

16. Title abstract and settlement offices

232

37.1%

17. Other activities related to real estate

876

37%

18. Wireless telecommunications carriers (except satellite)

484

37%

19. Men's and boys' clothing and furnishings merchant wholesalers

265

35.9%

20. Siding contractors

212

35.4%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

20 business types* with the lowest SBA loan 10-year default rate (2006-2015)

Business**

Number of loans 2006-2015

10-year default rate

1. Breweries

308

3.9%

2. Support activities for oil and gas operations

569

4%

3. Veterinary services

2,732

4.3%

4. Broilers and other meat type chicken production

1,654

4.8%

5. Offices of optometrists

1,317

4.9%

6. Offices of dentists

7,204

5.2%

7. Pharmacies and drug stores

1,809

5.3%

8. Chicken egg production

297

5.4%

9. Offices of physicians (except mental health specialists)

6,683

5.6%

10. Funeral homes and funeral services

679

6.5%

11. Recyclable material merchant wholesalers

347

7.2%

12. Lessors of nonresidential buildings (except miniwarehouses)

809

7.7%

13. Offices of physical, occupational and speech therapists, and audiologists

1,807

7.8%

14. Hotels (except casino hotels) and motels

3,370

7.8%

15. Other heavy and civil engineering construction

526

8.8%

16. Machine tool manufacturing

250

8.8%

17. Machine shops

1,577

8.8%

18. Home health care services

2,121

8.8%

19. Offices of lawyers

4,923

9.2%

20. Wineries

210

9.5%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

What businesses attract the most SBA loans?

To find what businesses attract the most loans, we sorted loan approvals by business type in 2016, the latest full year of data. We then telescoped out to see approval rates by business type, or category, across the first 16 years of the new century — a time frame that includes two presidential administrations and two cycles of recession and recovery — to see how they compare.

Some observations

Restaurants are top draw for SBA loans. Loans to both full- and limited-service restaurant categories (think table service versus counter service) accounted for 8.7% of all loans in 2016, and 9% of SBA loans issued since 2001.

Nearly 1 in 3 loans went to the top 20 business types. Over 1,000 business categories received 7(a) loan funding from 2001 to 2016, but the 20 that received the most accounted for 30.4% of approved loans.

Top 2016 recipients mirror the 16-year picture. Comparing last year’s top 20 loans by business category to the top 20 from 2001 to 2016, 19 categories dominate both lists.

20 business types* with the highest SBA loan approval rate (2016)

Business**

Number of loans approved in 2016

Percentage of 2016 loans

1. Full-service restaurants

2,910

4.92%

2. Limited-service restaurants

2,214

3.74%

3. Offices of dentists

1,070

1.81%

4. General freight trucking, long-distance, truckload

1,046

1.77%

5. Fitness and recreational sports centers

1,019

1.72%

6. Residential remodelers

1,015

1.72%

7. Hotels (except casino hotels) and motels

990

1.67%

8. Landscaping services

917

1.55%

9. All other specialty trade contractors

868

1.47%

10. Beauty salons

837

1.42%

11. Plumbing, heating, and air-conditioning contractors

806

1.36%

12. General freight trucking, local

786

1.33%

13. General automotive repair

776

1.31%

14. Offices of physicians (except mental health specialists)

752

1.27%

15. Child day care services

746

1.26%

16. Offices of lawyers

732

1.24%

17. Beer, wine and liquor stores

597

1.01%

18. Gasoline stations with convenience stores

582

0.98%

19. Electrical contractors and other wiring installation contractors

580

0.98%

20. Insurance agencies and brokerages

529

0.89%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

20 business types* with the highest SBA loan approval rate (2001-2016)

Business**

Number of loans approved

Percentage of all loans

1. Full-service restaurants

42,984

4.80%

2. Limited-service restaurants

37,185

4.15%

3. Offices of dentists

14,344

1.60%

4. Beauty salons

14,178

1.58%

5. General automotive repair

13,518

1.51%

6. Gasoline stations with convenience stores

12,445

1.39%

7. Landscaping services

12,377

1.38%

8. Offices of physicians (except mental health specialists)

11,901

1.33%

9. All other specialty trade contractors

11,658

1.30%

10. Child day care services

10,317

1.15%

11. Hotels (except casino hotels) and motels

9,900

1.11%

12. Offices of chiropractors

9,686

1.08%

13. Fitness and recreational sports centers

9,500

1.06%

14. Electrical contractors and other wiring installation contractors

9,384

1.05%

15. General freight trucking, local

9,341

1.04%

16. Beer, wine and liquor stores

8,925

1.00%

17. Plumbing, heating, and air-conditioning contractors

8,843

0.99%

18. Residential remodelers

8,777

0.98%

19. Offices of lawyers

8,769

0.98%

20. General freight trucking, long-distance, truckload

8,072

0.90%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

Trending: Lawyers, bars and health clubs

To chart the fastest-growing industries in recent years by increase in SBA-backed loans, we measured 2016 loan data against 2011, when the job market had its first full year of recovery after the Great Recession, according to U.S. Bureau of Labor Statistics. We also looked to see how 2016 industry approval trends compared with 2001 data.

Successful loan applications surged in recent years to businesses that focus on personal services, beverages and delivery. Overall, the number of loan approvals for these businesses increased 30% from 2011 through 2016. Some trends of note:

Fitness and recreational sports centers gain strength. This business category was the fastest-growing in 2016 by increase in SBA-backed loans. Approved loans jumped 128.5% from 2011; the growth rate from 2001 was even higher (228.7%).

Loans to lawyers chart highest 16-year growth. SBA loan approvals to offices of lawyers in 2016 were up 246.9% over the rate in 2001. Law firms ranked 19th among businesses receiving loan approvals from 2001 through 2016.

Companies on the move. In the past six years, loans to local freight trucking companies grew 91.2% and charted 208.2% growth since 2001.

Bars, coffee shops and liquor stores serving more. Places to sit down for a drink, be it a bar (68.2%) or a snack and nonalcoholic beverage bar like a coffee shop (68%), charted the fourth- and fifth-fastest growth in SBA loan approvals from 2011 to 2016. Similarly, places to pick up a cold one (beer, wine and liquor stores) were among the top 20 fastest-growing categories (41.1%) of loan recipients in the past six years.

Rise of personal-service businesses. “Other personal care services” — a catch-all business category that includes day spas, hair weaving and tattoo shops — was the third-fastest growing category (76.2%) since 2011. “All other personal services” — another broad category that includes wedding planners, personal trainers and house sitters — charted the ninth-highest increase for the past six years.

20 fastest-growing businesses* based on SBA loan approval (2011-2016)

Business**

Loans approved in 2011

Loans approved in 2016

Percentage increase in loans

1. Fitness and recreational sports centers

446

1,019

128.5%

2. General freight trucking, local

411

786

91.2%

3. Other personal care services

231

407

76.2%

4. Drinking places (alcoholic beverages)

233

392

68.2%

5. Snack and nonalcoholic beverage bars

312

524

68%

6. Landscaping services

578

917

58.7%

7. Hotels (except casino hotels) and motels

659

990

50.2%

8. Child day care services

511

746

46%

9. All other personal services

267

389

45.7%

10. Single family housing construction

243

352

44.9%

11. Dry cleaning and laundry services (except coin-operated)

203

294

44.8%

12. Insurance agencies and brokerages

368

529

43.8%

13. Beauty salons

586

837

42.8%

14. Beer, wine and liquor stores

423

597

41.1%

15. General automotive repair

554

776

40.1%

16. All other specialty trade contractors

628

868

38.2%

17. Electrical contractors and other wiring installation contractors

433

580

34%

18. Full-service restaurants

2,182

2,910

33.4%

19. Automotive body, paint, and interior repair and maintenance

222

291

31.1%

20. Limited-service restaurants

1,726

2,214

28.3%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

20 fastest-growing businesses* based on SBA loan approval (2001-2016)

Business**

Loans approved in 2001

Loans approved in 2016

Percentage increase in loans

1. Offices of lawyers

211

732

246.9%

2. Fitness and recreational sports centers

310

1,019

228.7%

3. General freight trucking, local

255

786

208.2%

4. Offices of dentists

471

1,070

127.2%

5. All other specialty trade contractors

383

868

126.6%

6. Landscaping services

405

917

126.4%

7. Snack and nonalcoholic beverage bars

234

524

123.9%

8. Veterinary services

224

456

103.6%

9. Other personal care services

209

407

94.7%

10. Drinking places (alcoholic beverages)

220

392

78.2%

11. All other personal services

220

389

76.8%

12. Offices of physicians (except mental health specialists)

448

752

67.9%

13. Hotels (except casino hotels) and motels

611

990

62%

14. Engineering services

209

335

60.3%

15. Limited-service restaurants

1,507

2,214

46.9%

16. Beauty salons

573

837

46.1%

17. Child day care services

511

746

46%

18. Beer, wine and liquor stores

409

597

46%

19. Single family housing construction

246

352

43.1%

20. Full-service restaurants

2,280

2,910

27.6%

* Based on business types, or categories, that received 200 or more loans ** For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: A NerdWallet analysis of data provided by the U.S. Small Business Administration

Important notes for businesses

Some industries get far more SBA loans. SBA loans funded hundreds of business categories from 2001 through 2016. But the fact that nearly a third went to just 20 kinds of businesses suggests entrepreneurs in these fields might want to consider an SBA loan.

Size to qualify depends on industry. SBA definitions of qualifying businesses by number of employees or annual receipts vary widely — prohibiting borrowing by businesses that have more than 500 employees in some cases and more than $7.5 million in average annual receipts in others. Check with the SBA to see if your business qualifies.

Average loan amounts vary widely. For example, the highest average loan size in 2016 was to hotels, with a loan amount of $1.9 million, on average. By comparison, limited-service restaurants received about $350,000, on average, per loan.

Find the right 7(a) lender for you. Banks follow SBA guidelines but use their own underwriting criteria to evaluate loan applications. Ask your SBA district office or consult the SBA LINC tool to find potential 7(a) lenders. (Want to know more? This SBA loan guide will help.)


10-year SBA 7(a) loan defaults (starting in 2006) for business types with 200 or more loans

Business type

Number of chargeoffs (defaults)

Number of loans

% of chargeoffs for 10-year period starting in 2006

Residential Property Managers

411

889

46.23

Offices of Real Estate Agents and Brokers

1199

2638

45.45

Multifamily Housing Construction

300

701

42.80

Video Tape and Disc Rental

99

232

42.67

All Other Support Activities for Transportation

244

580

42.07

Nonresidential Property Managers

142

338

42.01

Window Treatment Stores

97

233

41.63

Department Stores

118

291

40.55

All Other Support Services

484

1196

40.47

Offices of Real Estate Appraisers

143

354

40.40

Travel Agencies

148

376

39.36

Cut and Sew Apparel Contractors

94

242

38.84

Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers

214

560

38.21

Computer and Computer Peripheral Equipment and Software Merchant Wholesalers

125

337

37.09

Title Abstract and Settlement Offices

86

232

37.07

Other Activities Related to Real Estate

324

876

36.99

Wireless Telecommunications Carriers (except Satellite)

179

484

36.98

Men's and Boys' Clothing and Furnishings Merchant Wholesalers

95

265

35.85

Siding Contractors

75

212

35.38

Clothing Accessories Stores

326

933

34.94

All Other Business Support Services

348

997

34.90

Household Appliances, Electric Housewares, and Consumer Electronics Merchant Wholesalers

89

255

34.90

Tile and Terrazzo Contractors

176

507

34.71

Family Clothing Stores

303

877

34.55

Art Dealers

130

377

34.48

Other Commercial Equipment Merchant Wholesalers

87

254

34.25

Software and Other Prerecorded Compact Disc, Tape, and Record Reproducing

86

252

34.13

Interior Design Services

375

1107

33.88

Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers

344

1018

33.79

All Other Legal Services

100

296

33.78

Women's, Girls', and Infants' Cut and Sew Apparel Manufacturing

83

246

33.74

Carpentry Contractors

477

1414

33.73

Women's Clothing Stores

535

1591

33.63

Cosmetics, Beauty Supplies, and Perfume Stores

404

1207

33.47

Automotive Transmission Repair

113

339

33.33

Couriers and Express Delivery Services

105

316

33.23

All Other General Merchandise Stores

463

1400

33.07

Men's Clothing Stores

110

334

32.93

Computer and Office Machine Repair and Maintenance

167

511

32.68

Nail Salons

426

1307

32.59

All Other Information Services

167

513

32.55

Single Family Housing Construction

1323

4074

32.47

Marketing Consulting Services

729

2280

31.97

All Other Home Furnishings Stores

323

1012

31.92

Administrative Management and General Management Consulting Services

861

2705

31.83

Drugs and Druggists' Sundries Merchant Wholesalers

162

509

31.83

Shoe Stores

229

725

31.59

Gift, Novelty, and Souvenir Stores

622

1971

31.56

Flooring Contractors

359

1142

31.44

Book Stores

134

427

31.38

Independent Artists, Writers, and Performers

219

705

31.06

Flower, Nursery Stock, and Florists' Supplies Merchant Wholesalers

80

260

30.77

Other Technical and Trade Schools

109

355

30.70

Furniture Stores

527

1725

30.55

Painting and Wall Covering Contractors

554

1817

30.49

Electronics Stores

588

1929

30.48

Advertising Agencies

377

1246

30.26

Other Clothing Stores

537

1776

30.24

Automotive Glass Replacement Shops

71

238

29.83

Appliance Repair and Maintenance

60

203

29.56

Children's and Infants' Clothing Stores

140

478

29.29

Janitorial Services

743

2557

29.06

Cafeterias, Grill Buffets, and Buffets

71

245

28.98

Limousine Service

196

677

28.95

Floor Covering Stores

255

882

28.91

Other Gasoline Stations

81

281

28.83

Local Messengers and Local Delivery

132

458

28.82

Office Administrative Services

85

296

28.72

Florists

335

1167

28.71

Pet and Pet Supplies Stores

229

809

28.31

Exam Preparation and Tutoring

129

456

28.29

Other Electronic Parts and Equipment Merchant Wholesalers

138

489

28.22

Home Furnishing Merchant Wholesalers

121

429

28.21

Graphic Design Services

296

1054

28.08

Investment Advice

203

723

28.08

All Other Motor Vehicle Dealers

89

318

27.99

Confectionery and Nut Stores

82

293

27.99

Dental Laboratories

101

361

27.98

Other Specialized Design Services

141

505

27.92

New Car Dealers

112

404

27.72

Jewelry and Silverware Manufacturing

77

278

27.70

All Other Miscellaneous Ambulatory Health Care Services

147

531

27.68

Periodical Publishers

99

359

27.58

Used Car Dealers

417

1518

27.47

Other Building Material Dealers

309

1128

27.39

Cut Stone and Stone Product Manufacturing

72

264

27.27

Automotive Exhaust System Repair

65

240

27.08

Motorcycle, ATV, and All Other Motor Vehicle Dealers

117

432

27.08

Used Household and Office Goods Moving

87

322

27.02

Other Management Consulting Services

540

2001

26.99

Other Personal and Household Goods Repair and Maintenance

245

908

26.98

Security Guards and Patrol Services

97

361

26.87

Human Resources and Executive Search Consulting Services

133

499

26.65

Residential Remodelers

1394

5247

26.57

Hobby, Toy, and Game Stores

205

777

26.38

General Freight Trucking, Long-Distance, Less Than Truckload

84

319

26.33

Motor Vehicle Supplies and New Parts Merchant Wholesalers

195

746

26.14

Sewing, Needlework, and Piece Goods Stores

103

394

26.14

Toy and Hobby Goods and Supplies Merchant Wholesalers

65

249

26.10

Masonry Contractors

217

832

26.08

All Other Transit and Ground Passenger Transportation

73

280

26.07

Promoters of Performing Arts, Sports, and Similar Events without Facilities

58

224

25.89

Piece Goods, Notions, and Other Dry Goods Merchant Wholesalers

101

391

25.83

Furniture Merchant Wholesalers

94

366

25.68

Brick, Stone, and Related Construction Material Merchant Wholesalers

78

304

25.66

All Other Specialty Food Stores

600

2347

25.56

All Other Personal Services

867

3393

25.55

Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers

109

427

25.53

All Other Health and Personal Care Stores

169

663

25.49

All Other Miscellaneous Food Manufacturing

67

263

25.48

Office Supplies and Stationery Stores

132

519

25.43

Service Establishment Equipment and Supplies Merchant Wholesalers

61

241

25.31

Drycleaning and Laundry Services (except Coin-Operated)

832

3301

25.20

Glass and Glazing Contractors

94

373

25.20

Household Appliance Stores

119

475

25.05

Collection Agencies

59

236

25.00

All Other Miscellaneous Store Retailers (except Tobacco Stores)

1116

4470

24.97

Tax Preparation Services

251

1007

24.93

Commercial Photography

74

297

24.92

Security Systems Services (except Locksmiths)

160

644

24.84

Vending Machine Operators

228

923

24.70

All Other Miscellaneous Manufacturing

286

1160

24.66

Food (Health) Supplement Stores

166

678

24.48

Other Services to Buildings and Dwellings

355

1457

24.37

Child and Youth Services

53

218

24.31

Meat Markets

159

654

24.31

Automobile and Other Motor Vehicle Merchant Wholesalers

74

305

24.26

Wood Kitchen Cabinet and Countertop Manufacturing

174

718

24.23

Caterers

356

1473

24.17

Structural Steel Erection Contractors

60

249

24.10

Building Inspection Services

59

245

24.08

Other Automotive Mechanical and Electrical Repair and Maintenance

136

568

23.94

Temporary Help Services

121

507

23.87

Other Services Related to Advertising

118

495

23.84

Apparel Accessories and Other Apparel Manufacturing

102

428

23.83

Other Construction Material Merchant Wholesalers

105

442

23.76

Other Grocery and Related Products Merchant Wholesalers

200

842

23.75

Snack and Nonalcoholic Beverage Bars

967

4071

23.75

Fish and Seafood Merchant Wholesalers

55

233

23.61

Tobacco Stores

90

382

23.56

General Freight Trucking, Local

1322

5626

23.50

Amusement Arcades

57

243

23.46

Jewelry Stores

352

1502

23.44

Home and Garden Equipment Repair and Maintenance

53

227

23.35

Internet Publishing and Broadcasting and Web Search Portals

60

257

23.35

Other Miscellaneous Nondurable Goods Merchant Wholesalers

376

1612

23.33

Other Personal Care Services

594

2546

23.33

Process, Physical Distribution, and Logistics Consulting Services

83

357

23.25

Musical Instrument and Supplies Stores

70

302

23.18

Carpet and Upholstery Cleaning Services

178

770

23.12

Other Business Service Centers (including Copy Shops)

80

347

23.05

Photography Studios, Portrait

233

1013

23.00

Other Miscellaneous Durable Goods Merchant Wholesalers

537

2348

22.87

Other Commercial and Service Industry Machinery Manufacturing

69

302

22.85

Educational Support Services

151

661

22.84

All Other Telecommunications

58

255

22.75

All Other Outpatient Care Centers

73

321

22.74

Motion Picture and Video Production

187

827

22.61

Specialized Freight (except Used Goods) Trucking, Long-Distance

115

512

22.46

Fruit and Vegetable Markets

57

255

22.35

Newspaper Publishers

46

207

22.22

Wholesale Trade Agents and Brokers

107

482

22.20

Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers

232

1046

22.18

Other Building Equipment Contractors

151

682

22.14

Automotive Parts and Accessories Stores

404

1831

22.06

Hardware Merchant Wholesalers

44

202

21.78

Architectural Services

214

984

21.75

Drywall and Insulation Contractors

244

1124

21.71

Employment Placement Agencies

184

848

21.70

All Other Miscellaneous Wood Product Manufacturing

82

379

21.64

Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers

93

430

21.63

General Line Grocery Merchant Wholesalers

107

495

21.62

Supermarkets and Other Grocery (except Convenience) Stores

800

3706

21.59

Other Accounting Services

335

1562

21.45

Landscape Architectural Services

251

1181

21.25

Other Foundation, Structure, and Building Exterior Contractors

153

721

21.22

Nursery, Garden Center, and Farm Supply Stores

137

653

20.98

Private Mail Centers

141

680

20.74

Baked Goods Stores

152

736

20.65

Wired Telecommunications Carriers

53

257

20.62

Other Building Finishing Contractors

176

857

20.54

Sporting and Recreational Goods and Supplies Merchant Wholesalers

160

782

20.46

Other Support Activities for Road Transportation

45

221

20.36

Sign Manufacturing

185

913

20.26

Concrete Contractors

287

1425

20.14

Beauty Salons

1522

7559

20.13

Commercial Screen Printing

147

737

19.95

Freight Transportation Arrangement

139

697

19.94

All Other Consumer Goods Rental

83

423

19.62

All Other Automotive Repair and Maintenance

216

1106

19.53

Wine and Distilled Alcoholic Beverage Merchant Wholesalers

62

318

19.50

Car Washes

300

1548

19.38

Motor Vehicle Towing

153

791

19.34

Diagnostic Imaging Centers

67

347

19.31

Commercial Bakeries

96

498

19.28

Fine Arts Schools

95

495

19.19

All Other Specialty Trade Contractors

1328

6938

19.14

Other Individual and Family Services

72

378

19.05

Software Publishers

78

410

19.02

Fresh Fruit and Vegetable Merchant Wholesalers

66

348

18.97

Industrial Building Construction

81

427

18.97

Other Industrial Machinery Manufacturing

50

266

18.80

Electrical Contractors and Other Wiring Installation Contractors

815

4349

18.74

General Freight Trucking, Long-Distance, Truckload

825

4403

18.74

Electronic Shopping and Mail-Order Houses

294

1579

18.62

Hardware Stores

208

1118

18.60

Exterminating and Pest Control Services

84

453

18.54

Services for the Elderly and Persons with Disabilities

68

368

18.48

Used Merchandise Stores

132

716

18.44

Commercial and Institutional Building Construction

385

2093

18.39

Coin-Operated Laundries and Drycleaners

293

1595

18.37

Sports and Recreation Instruction

215

1171

18.36

Commercial Printing (except Screen and Books)

498

2725

18.28

Automotive Oil Change and Lubrication Shops

74

406

18.23

Sporting Goods Stores

494

2711

18.22

Limited-Service Restaurants

3475

19085

18.21

Retail Bakeries

175

966

18.12

Full-Service Restaurants

4138

22965

18.02

Roofing Contractors

220

1256

17.52

Tire Dealers

77

440

17.50

Automotive Body, Paint, and Interior Repair and Maintenance

429

2474

17.34

All Other Miscellaneous Schools and Instruction

165

953

17.31

Barber Shops

133

770

17.27

Support Activities for Animal Production

38

220

17.27

Specialized Freight (except Used Goods) Trucking, Local

270

1567

17.23

Fitness and Recreational Sports Centers

860

4998

17.21

Custom Computer Programming Services

355

2076

17.10

All Other Amusement and Recreation Industries

326

1912

17.05

Site Preparation Contractors

356

2126

16.75

Industrial Machinery and Equipment Merchant Wholesalers

101

607

16.64

General Automotive Repair

1073

6470

16.58

Elementary and Secondary Schools

35

213

16.43

Optical Goods Stores

45

275

16.36

Other Electronic and Precision Equipment Repair and Maintenance

37

228

16.23

Meat and Meat Product Merchant Wholesalers

47

292

16.10

Power and Communication Line and Related Structures Construction

41

255

16.08

Insurance Agencies and Brokerages

539

3367

16.01

Plumbing, Heating, and Air-Conditioning Contractors

899

5659

15.89

Other Direct Selling Establishments

160

1008

15.87

Landscaping Services

1020

6449

15.82

Sheet Metal Work Manufacturing

41

265

15.47

Computer Systems Design Services

394

2563

15.37

Water and Sewer Line and Related Structures Construction

71

463

15.33

Sporting and Athletic Goods Manufacturing

37

243

15.23

All Other Professional, Scientific, and Technical Services

461

3030

15.21

Convenience Stores

515

3386

15.21

Child Day Care Services

660

4367

15.11

Testing Laboratories

30

201

14.93

Farm Supplies Merchant Wholesalers

30

202

14.85

Data Processing, Hosting, and Related Services

94

639

14.71

Other Computer Related Services

323

2212

14.60

Medical Laboratories

45

309

14.56

Bowling Centers

48

334

14.37

Ambulance Services

35

246

14.23

Drinking Places (Alcoholic Beverages)

383

2692

14.23

Other Commercial and Industrial Machinery and Equipment Rental and Leasing

64

459

13.94

Gasoline Stations with Convenience Stores

798

5737

13.91

General Rental Centers

37

268

13.81

Offices of All Other Miscellaneous Health Practitioners

207

1517

13.65

Nursing Care Facilities

34

253

13.44

Research and Development in the Physical, Engineering, and Life Sciences

31

234

13.25

Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance

164

1244

13.18

Other Scientific and Technical Consulting Services

138

1047

13.18

Offices of Chiropractors

611

4665

13.10

All Other Miscellaneous General Purpose Machinery Manufacturing

31

238

13.03

Surveying and Mapping (except Geophysical) Services

28

215

13.02

All Other Miscellaneous Fabricated Metal Product Manufacturing

104

817

12.73

Offices of Physicians, Mental Health Specialists

49

386

12.69

Offices of Certified Public Accountants

324

2582

12.55

Fabricated Structural Metal Manufacturing

42

341

12.32

Metal Service Centers and Other Metal Merchant Wholesalers

29

239

12.13

All Other Plastics Product Manufacturing

69

574

12.02

Pet Care (except Veterinary) Services

200

1668

11.99

Beer, Wine, and Liquor Stores

501

4217

11.88

Food Service Contractors

86

727

11.83

Offices of Podiatrists

31

263

11.79

Industrial Supplies Merchant Wholesalers

52

444

11.71

Fuel Dealers

33

288

11.46

Mobile Food Services

64

565

11.33

Offices of Mental Health Practitioners (except Physicians)

54

477

11.32

Logging

50

444

11.26

Engineering Services

288

2575

11.18

Environmental Consulting Services

54

500

10.80

Solid Waste Collection

51

480

10.62

Highway, Street, and Bridge Construction

77

772

9.97

Wineries

20

210

9.52

Offices of Lawyers

451

4923

9.16

Home Health Care Services

187

2121

8.82

Machine Shops

139

1577

8.81

Machine Tool Manufacturing

22

250

8.80

Other Heavy and Civil Engineering Construction

46

526

8.75

Hotels (except Casino Hotels) and Motels

262

3370

7.77

Offices of Physical, Occupational and Speech Therapists, and Audiologists

140

1807

7.75

Lessors of Nonresidential Buildings (except Miniwarehouses)

62

809

7.66

Recyclable Material Merchant Wholesalers

25

347

7.20

Funeral Homes and Funeral Services

44

679

6.48

Offices of Physicians (except Mental Health Specialists)

372

6683

5.57

Chicken Egg Production

16

297

5.39

Pharmacies and Drug Stores

95

1809

5.25

Offices of Dentists

372

7204

5.16

Offices of Optometrists

65

1317

4.94

Broilers and Other Meat Type Chicken Production

79

1654

4.78

Veterinary Services

118

2732

4.32

Support Activities for Oil and Gas Operations

23

569

4.04

Breweries

12

308

3.90

For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: NerdWallet analysis of data provided by the U.S. Small Business Administration.

METHODOLOGY

NerdWallet examined the Small Business Administration’s records of loans approved in the 7(a) program for the fiscal years 1991-2016 (October 1, 1990, through September 30, 2016). The records were obtained through the SBA.

Records for loans that were canceled before disbursement have been excluded from this analysis.

All analysis of specific years are fiscal years, so 2016 is from Oct. 1, 2015, to Sept. 30, 2016.

Dollar amounts were adjusted for inflation and expressed as 2016 dollars.

Default rates

To calculate default rates, we examined all loans that originated and defaulted within a 10-year time frame. For example, 7(a) program loans that originated and failed from 1991 through 2000 saw 11.5% of the loans default; 1992-2001 loans defaulted at a rate of 12.1%, and so forth.

We eliminated loan records missing a North American Industry Classification System (NAICS) code, and incomplete and duplicate records, to yield a total of 1.05 million unique, non-canceled loans. We also eliminated 2016 and 2017 data from the analysis, as those loans are too new for meaningful failure rates. (The average loan went into default 4.7 years after origination in 1991-2015; the median span is 4.1 years before default, our research found.)

To calculate 2006 through 2015 default rates by business category, we eliminated categories that saw fewer than 200 loans during that time frame.

Loan approval trends

To examine loan approval trends by business, loan records from 2001 to 2016 were identified by origination year and NAICS type. The remaining 895,746 unique, non-canceled loans were used in this analysis.

Records that had NAICS codes and descriptions from 1997, 2002 and 2007 were updated to correspond with identifying information from the updated 2012 NAICS edition.

To calculate the fastest-growing industries, we compared the number of loans each industry received in the fiscal years 2001, 2011 and 2016. We eliminated any business category that received fewer than 200 loans each of those years.

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