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1 in 6 Small Business Administration Loans Fail, Study Finds

October 3, 2017
Small Business
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. (See the chart below.)

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. (See the full study methodology at the end of this report.)

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 2006-201510-year default rate
* 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
1. Mortgage and nonmortgage loan brokers948
65.6%
2. Residential property managers88946.2%
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
58042.1%
7. Nonresidential property managers33842%
8. Window treatment stores23341.6%
9. Department stores29140.6%
10. All other support services1,19640.5%
11. Offices of real estate appraisers35440.4%
12. Travel agencies37639.4%
13. Cut and sew apparel contractors24238.8%
14. Jewelry, watch, precious stone, and precious metal merchant wholesalers56038.2%
15. Computer and computer peripheral equipment and software merchant wholesalers33737.1%
16. Title abstract and settlement offices23237.1%
17. Other activities related to real estate87637%
18. Wireless telecommunications carriers (except satellite)48437%
19. Men's and boys' clothing and furnishings merchant wholesalers26535.9%
20. Siding contractors21235.4%

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

Business**Number of loans 2006-201510-year default rate
* 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
1. Breweries308
3.9%
2. Support activities for oil and gas operations5694%
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
7,2045.2%
7. Pharmacies and drug stores1,8095.3%
8. Chicken egg production2975.4%
9. Offices of physicians (except mental health specialists)6,6835.6%
10. Funeral homes and funeral services6796.5%
11. Recyclable material merchant wholesalers3477.2%
12. Lessors of nonresidential buildings (except miniwarehouses)8097.7%
13. Offices of physical, occupational and speech therapists, and audiologists1,8077.8%
14. Hotels (except casino hotels) and motels3,3707.8%
15. Other heavy and civil engineering construction5268.8%
16. Machine tool manufacturing2508.8%
17. Machine shops1,5778.8%
18. Home health care services2,1218.8%
19. Offices of lawyers4,9239.2%
20. Wineries2109.5%

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 2016Percentage of 2016 loans
* 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
1. Full-service restaurants2,910
4.92%
2. Limited-service restaurants2,2143.74%
3. Offices of dentists
1,070
1.81%
4. General freight trucking, long-distance, truckload
1,046
1.77%
5. Fitness and recreational sports centers1,019
1.72%
6. Residential remodelers
1,0151.72%
7. Hotels (except casino hotels) and motels9901.67%
8. Landscaping services9171.55%
9. All other specialty trade contractors8681.47%
10. Beauty salons8371.42%
11. Plumbing, heating, and air-conditioning contractors8061.36%
12. General freight trucking, local7861.33%
13. General automotive repair7761.31%
14. Offices of physicians (except mental health specialists)7521.27%
15. Child day care services7461.26%
16. Offices of lawyers7321.24%
17. Beer, wine and liquor stores5971.01%
18. Gasoline stations with convenience stores5820.98%
19. Electrical contractors and other wiring installation contractors5800.98%
20. Insurance agencies and brokerages5290.89%

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

Business**Number of loans approvedPercentage of all loans
* 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
1. Full-service restaurants42,984
4.80%

2. Limited-service restaurants37,1854.15%
3. Offices of dentists
14,344
1.60%
4. Beauty salons
14,178
1.58%
5. General automotive repair13,5181.51%
6. Gasoline stations with convenience stores
12,4451.39%
7. Landscaping services12,3771.38%
8. Offices of physicians (except mental health specialists)11,9011.33%
9. All other specialty trade contractors11,6581.30%
10. Child day care services10,3171.15%
11. Hotels (except casino hotels) and motels9,9001.11%
12. Offices of chiropractors9,6861.08%
13. Fitness and recreational sports centers9,5001.06%
14. Electrical contractors and other wiring installation contractors9,3841.05%
15. General freight trucking, local9,3411.04%
16. Beer, wine and liquor stores8,9251.00%
17. Plumbing, heating, and air-conditioning contractors8,8430.99%
18. Residential remodelers8,7770.98%
19. Offices of lawyers8,7690.98%
20. General freight trucking, long-distance, truckload8,0720.90%

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 2016Percentage increase in loans
* 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
1. Fitness and recreational sports centers446
1,019
128.5%
2. General freight trucking, local411786
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 bars31252468%
6. Landscaping services
57891758.7%
7. Hotels (except casino hotels) and motels65999050.2%
8. Child day care services51174646%
9. All other personal services26738945.7%
10. Single family housing construction24335244.9%
11. Dry cleaning and laundry services (except coin-operated)20329444.8%
12. Insurance agencies and brokerages36852943.8%
13. Beauty salons58683742.8%
14. Beer, wine and liquor stores42359741.1%
15. General automotive repair55477640.1%
16. All other specialty trade contractors62886838.2%
17. Electrical contractors and other wiring installation contractors43358034%
18. Full-service restaurants2,1822,91033.4%
19. Automotive body, paint, and interior repair and maintenance22229131.1%
20. Limited-service restaurants1,7262,21428.3%

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

Business**Loans approved in 2001Loans approved in 2016Percentage increase in loans
* 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
1. Offices of lawyers211
732246.9%
2. Fitness and recreational sports centers3101,019
228.7%
3. General freight trucking, local
255786208.2%
4. Offices of dentists
471
1,070
127.2%
5. All other specialty trade contractors383868126.6%
6. Landscaping services
405917126.4%
7. Snack and nonalcoholic beverage bars234524123.9%
8. Veterinary services224456103.6%
9. Other personal care services20940794.7%
10. Drinking places (alcoholic beverages)22039278.2%
11. All other personal services22038976.8%
12. Offices of physicians (except mental health specialists)44875267.9%
13. Hotels (except casino hotels) and motels61199062%
14. Engineering services20933560.3%
15. Limited-service restaurants1,5072,21446.9%
16. Beauty salons57383746.1%
17. Child day care services51174646%
18. Beer, wine and liquor stores40959746%
19. Single family housing construction24635243.1%
20. Full-service restaurants2,2802,91027.6%

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 typeNumber of chargeoffs (defaults)Number of loans% of chargeoffs for 10-year period starting in 2006
For detailed NAICS business descriptions, go to www.naics.com/search/

SOURCE: NerdWallet analysis of data provided by the U.S. Small Business Administration.
Residential Property Managers41188946.23
Offices of Real Estate Agents and Brokers1199263845.45
Multifamily Housing Construction30070142.80
Video Tape and Disc Rental9923242.67
All Other Support Activities for Transportation24458042.07
Nonresidential Property Managers14233842.01
Window Treatment Stores9723341.63
Department Stores11829140.55
All Other Support Services484119640.47
Offices of Real Estate Appraisers14335440.40
Travel Agencies14837639.36
Cut and Sew Apparel Contractors9424238.84
Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers21456038.21
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers12533737.09
Title Abstract and Settlement Offices8623237.07
Other Activities Related to Real Estate32487636.99
Wireless Telecommunications Carriers (except Satellite)17948436.98
Men's and Boys' Clothing and Furnishings Merchant Wholesalers9526535.85
Siding Contractors7521235.38
Clothing Accessories Stores32693334.94
All Other Business Support Services34899734.90
Household Appliances, Electric Housewares, and Consumer Electronics Merchant Wholesalers8925534.90
Tile and Terrazzo Contractors17650734.71
Family Clothing Stores30387734.55
Art Dealers13037734.48
Other Commercial Equipment Merchant Wholesalers8725434.25
Software and Other Prerecorded Compact Disc, Tape, and Record Reproducing8625234.13
Interior Design Services375110733.88
Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers344101833.79
All Other Legal Services10029633.78
Women's, Girls', and Infants' Cut and Sew Apparel Manufacturing8324633.74
Carpentry Contractors477141433.73
Women's Clothing Stores535159133.63
Cosmetics, Beauty Supplies, and Perfume Stores404120733.47
Automotive Transmission Repair11333933.33
Couriers and Express Delivery Services10531633.23
All Other General Merchandise Stores463140033.07
Men's Clothing Stores11033432.93
Computer and Office Machine Repair and Maintenance16751132.68
Nail Salons426130732.59
All Other Information Services16751332.55
Single Family Housing Construction1323407432.47
Marketing Consulting Services729228031.97
All Other Home Furnishings Stores323101231.92
Administrative Management and General Management Consulting Services861270531.83
Drugs and Druggists' Sundries Merchant Wholesalers16250931.83
Shoe Stores22972531.59
Gift, Novelty, and Souvenir Stores622197131.56
Flooring Contractors359114231.44
Book Stores13442731.38
Independent Artists, Writers, and Performers21970531.06
Flower, Nursery Stock, and Florists' Supplies Merchant Wholesalers8026030.77
Other Technical and Trade Schools10935530.70
Furniture Stores527172530.55
Painting and Wall Covering Contractors554181730.49
Electronics Stores588192930.48
Advertising Agencies377124630.26
Other Clothing Stores537177630.24
Automotive Glass Replacement Shops7123829.83
Appliance Repair and Maintenance6020329.56
Children's and Infants' Clothing Stores14047829.29
Janitorial Services743255729.06
Cafeterias, Grill Buffets, and Buffets7124528.98
Limousine Service19667728.95
Floor Covering Stores25588228.91
Other Gasoline Stations8128128.83
Local Messengers and Local Delivery13245828.82
Office Administrative Services8529628.72
Florists335116728.71
Pet and Pet Supplies Stores22980928.31
Exam Preparation and Tutoring12945628.29
Other Electronic Parts and Equipment Merchant Wholesalers13848928.22
Home Furnishing Merchant Wholesalers12142928.21
Graphic Design Services296105428.08
Investment Advice20372328.08
All Other Motor Vehicle Dealers8931827.99
Confectionery and Nut Stores8229327.99
Dental Laboratories10136127.98
Other Specialized Design Services14150527.92
New Car Dealers11240427.72
Jewelry and Silverware Manufacturing7727827.70
All Other Miscellaneous Ambulatory Health Care Services14753127.68
Periodical Publishers9935927.58
Used Car Dealers417151827.47
Other Building Material Dealers309112827.39
Cut Stone and Stone Product Manufacturing7226427.27
Automotive Exhaust System Repair6524027.08
Motorcycle, ATV, and All Other Motor Vehicle Dealers11743227.08
Used Household and Office Goods Moving8732227.02
Other Management Consulting Services540200126.99
Other Personal and Household Goods Repair and Maintenance24590826.98
Security Guards and Patrol Services9736126.87
Human Resources and Executive Search Consulting Services13349926.65
Residential Remodelers1394524726.57
Hobby, Toy, and Game Stores20577726.38
General Freight Trucking, Long-Distance, Less Than Truckload8431926.33
Motor Vehicle Supplies and New Parts Merchant Wholesalers19574626.14
Sewing, Needlework, and Piece Goods Stores10339426.14
Toy and Hobby Goods and Supplies Merchant Wholesalers6524926.10
Masonry Contractors21783226.08
All Other Transit and Ground Passenger Transportation7328026.07
Promoters of Performing Arts, Sports, and Similar Events without Facilities5822425.89
Piece Goods, Notions, and Other Dry Goods Merchant Wholesalers10139125.83
Furniture Merchant Wholesalers9436625.68
Brick, Stone, and Related Construction Material Merchant Wholesalers7830425.66
All Other Specialty Food Stores600234725.56
All Other Personal Services867339325.55
Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers10942725.53
All Other Health and Personal Care Stores16966325.49
All Other Miscellaneous Food Manufacturing6726325.48
Office Supplies and Stationery Stores13251925.43
Service Establishment Equipment and Supplies Merchant Wholesalers6124125.31
Drycleaning and Laundry Services (except Coin-Operated)832330125.20
Glass and Glazing Contractors9437325.20
Household Appliance Stores11947525.05
Collection Agencies5923625.00
All Other Miscellaneous Store Retailers (except Tobacco Stores)1116447024.97
Tax Preparation Services251100724.93
Commercial Photography7429724.92
Security Systems Services (except Locksmiths)16064424.84
Vending Machine Operators22892324.70
All Other Miscellaneous Manufacturing286116024.66
Food (Health) Supplement Stores16667824.48
Other Services to Buildings and Dwellings355145724.37
Child and Youth Services5321824.31
Meat Markets15965424.31
Automobile and Other Motor Vehicle Merchant Wholesalers7430524.26
Wood Kitchen Cabinet and Countertop Manufacturing17471824.23
Caterers356147324.17
Structural Steel Erection Contractors6024924.10
Building Inspection Services5924524.08
Other Automotive Mechanical and Electrical Repair and Maintenance13656823.94
Temporary Help Services12150723.87
Other Services Related to Advertising11849523.84
Apparel Accessories and Other Apparel Manufacturing10242823.83
Other Construction Material Merchant Wholesalers10544223.76
Other Grocery and Related Products Merchant Wholesalers20084223.75
Snack and Nonalcoholic Beverage Bars967407123.75
Fish and Seafood Merchant Wholesalers5523323.61
Tobacco Stores9038223.56
General Freight Trucking, Local1322562623.50
Amusement Arcades5724323.46
Jewelry Stores352150223.44
Home and Garden Equipment Repair and Maintenance5322723.35
Internet Publishing and Broadcasting and Web Search Portals6025723.35
Other Miscellaneous Nondurable Goods Merchant Wholesalers376161223.33
Other Personal Care Services594254623.33
Process, Physical Distribution, and Logistics Consulting Services8335723.25
Musical Instrument and Supplies Stores7030223.18
Carpet and Upholstery Cleaning Services17877023.12
Other Business Service Centers (including Copy Shops)8034723.05
Photography Studios, Portrait233101323.00
Other Miscellaneous Durable Goods Merchant Wholesalers537234822.87
Other Commercial and Service Industry Machinery Manufacturing6930222.85
Educational Support Services15166122.84
All Other Telecommunications5825522.75
All Other Outpatient Care Centers7332122.74
Motion Picture and Video Production18782722.61
Specialized Freight (except Used Goods) Trucking, Long-Distance11551222.46
Fruit and Vegetable Markets5725522.35
Newspaper Publishers4620722.22
Wholesale Trade Agents and Brokers10748222.20
Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers232104622.18
Other Building Equipment Contractors15168222.14
Automotive Parts and Accessories Stores404183122.06
Hardware Merchant Wholesalers4420221.78
Architectural Services21498421.75
Drywall and Insulation Contractors244112421.71
Employment Placement Agencies18484821.70
All Other Miscellaneous Wood Product Manufacturing8237921.64
Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers9343021.63
General Line Grocery Merchant Wholesalers10749521.62
Supermarkets and Other Grocery (except Convenience) Stores800370621.59
Other Accounting Services335156221.45
Landscape Architectural Services251118121.25
Other Foundation, Structure, and Building Exterior Contractors15372121.22
Nursery, Garden Center, and Farm Supply Stores13765320.98
Private Mail Centers14168020.74
Baked Goods Stores15273620.65
Wired Telecommunications Carriers5325720.62
Other Building Finishing Contractors17685720.54
Sporting and Recreational Goods and Supplies Merchant Wholesalers16078220.46
Other Support Activities for Road Transportation4522120.36
Sign Manufacturing18591320.26
Concrete Contractors287142520.14
Beauty Salons1522755920.13
Commercial Screen Printing14773719.95
Freight Transportation Arrangement13969719.94
All Other Consumer Goods Rental8342319.62
All Other Automotive Repair and Maintenance216110619.53
Wine and Distilled Alcoholic Beverage Merchant Wholesalers6231819.50
Car Washes300154819.38
Motor Vehicle Towing15379119.34
Diagnostic Imaging Centers6734719.31
Commercial Bakeries9649819.28
Fine Arts Schools9549519.19
All Other Specialty Trade Contractors1328693819.14
Other Individual and Family Services7237819.05
Software Publishers7841019.02
Fresh Fruit and Vegetable Merchant Wholesalers6634818.97
Industrial Building Construction8142718.97
Other Industrial Machinery Manufacturing5026618.80
Electrical Contractors and Other Wiring Installation Contractors815434918.74
General Freight Trucking, Long-Distance, Truckload825440318.74
Electronic Shopping and Mail-Order Houses294157918.62
Hardware Stores208111818.60
Exterminating and Pest Control Services8445318.54
Services for the Elderly and Persons with Disabilities6836818.48
Used Merchandise Stores13271618.44
Commercial and Institutional Building Construction385209318.39
Coin-Operated Laundries and Drycleaners293159518.37
Sports and Recreation Instruction215117118.36
Commercial Printing (except Screen and Books)498272518.28
Automotive Oil Change and Lubrication Shops7440618.23
Sporting Goods Stores494271118.22
Limited-Service Restaurants34751908518.21
Retail Bakeries17596618.12
Full-Service Restaurants41382296518.02
Roofing Contractors220125617.52
Tire Dealers7744017.50
Automotive Body, Paint, and Interior Repair and Maintenance429247417.34
All Other Miscellaneous Schools and Instruction16595317.31
Barber Shops13377017.27
Support Activities for Animal Production3822017.27
Specialized Freight (except Used Goods) Trucking, Local270156717.23
Fitness and Recreational Sports Centers860499817.21
Custom Computer Programming Services355207617.10
All Other Amusement and Recreation Industries326191217.05
Site Preparation Contractors356212616.75
Industrial Machinery and Equipment Merchant Wholesalers10160716.64
General Automotive Repair1073647016.58
Elementary and Secondary Schools3521316.43
Optical Goods Stores4527516.36
Other Electronic and Precision Equipment Repair and Maintenance3722816.23
Meat and Meat Product Merchant Wholesalers4729216.10
Power and Communication Line and Related Structures Construction4125516.08
Insurance Agencies and Brokerages539336716.01
Plumbing, Heating, and Air-Conditioning Contractors899565915.89
Other Direct Selling Establishments160100815.87
Landscaping Services1020644915.82
Sheet Metal Work Manufacturing4126515.47
Computer Systems Design Services394256315.37
Water and Sewer Line and Related Structures Construction7146315.33
Sporting and Athletic Goods Manufacturing3724315.23
All Other Professional, Scientific, and Technical Services461303015.21
Convenience Stores515338615.21
Child Day Care Services660436715.11
Testing Laboratories3020114.93
Farm Supplies Merchant Wholesalers3020214.85
Data Processing, Hosting, and Related Services9463914.71
Other Computer Related Services323221214.60
Medical Laboratories4530914.56
Bowling Centers4833414.37
Ambulance Services3524614.23
Drinking Places (Alcoholic Beverages)383269214.23
Other Commercial and Industrial Machinery and Equipment Rental and Leasing6445913.94
Gasoline Stations with Convenience Stores798573713.91
General Rental Centers3726813.81
Offices of All Other Miscellaneous Health Practitioners207151713.65
Nursing Care Facilities3425313.44
Research and Development in the Physical, Engineering, and Life Sciences3123413.25
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance164124413.18
Other Scientific and Technical Consulting Services138104713.18
Offices of Chiropractors611466513.10
All Other Miscellaneous General Purpose Machinery Manufacturing3123813.03
Surveying and Mapping (except Geophysical) Services2821513.02
All Other Miscellaneous Fabricated Metal Product Manufacturing10481712.73
Offices of Physicians, Mental Health Specialists4938612.69
Offices of Certified Public Accountants324258212.55
Fabricated Structural Metal Manufacturing4234112.32
Metal Service Centers and Other Metal Merchant Wholesalers2923912.13
All Other Plastics Product Manufacturing6957412.02
Pet Care (except Veterinary) Services200166811.99
Beer, Wine, and Liquor Stores501421711.88
Food Service Contractors8672711.83
Offices of Podiatrists3126311.79
Industrial Supplies Merchant Wholesalers5244411.71
Fuel Dealers3328811.46
Mobile Food Services6456511.33
Offices of Mental Health Practitioners (except Physicians)5447711.32
Logging5044411.26
Engineering Services288257511.18
Environmental Consulting Services5450010.80
Solid Waste Collection5148010.62
Highway, Street, and Bridge Construction777729.97
Wineries202109.52
Offices of Lawyers45149239.16
Home Health Care Services18721218.82
Machine Shops13915778.81
Machine Tool Manufacturing222508.80
Other Heavy and Civil Engineering Construction465268.75
Hotels (except Casino Hotels) and Motels26233707.77
Offices of Physical, Occupational and Speech Therapists, and Audiologists14018077.75
Lessors of Nonresidential Buildings (except Miniwarehouses)628097.66
Recyclable Material Merchant Wholesalers253477.20
Funeral Homes and Funeral Services446796.48
Offices of Physicians (except Mental Health Specialists)37266835.57
Chicken Egg Production162975.39
Pharmacies and Drug Stores9518095.25
Offices of Dentists37272045.16
Offices of Optometrists6513174.94
Broilers and Other Meat Type Chicken Production7916544.78
Veterinary Services11827324.32
Support Activities for Oil and Gas Operations235694.04
Breweries123083.90

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.

About the authors