Financing / Data study
SBA loan default rates by industry: what happened to 478,963 loans
Everyone has heard that restaurants fail. The loan records say something more specific, and restaurants are not at the top of the list.
"Default rate" is the phrase people search for, so it is in the headline. What the public records measure is narrower, and you should know the difference before reading a single number.
SBA's file marks a loan charged off when the remaining balance has been written off. That is the last step in the life of a failed loan: it comes after the borrower has stopped paying and after the lender has worked through servicing and liquidation. Loans that are behind on payments but not yet written off are not identified in the public file. So the charge-off rate is lower than the default rate, and it arrives later. It is still the only outcome SBA publishes loan by loan, and it is the one that tells you a loan ended in a loss.
We took every 7(a) loan approved in fiscal years 2010 through 2019, 545,751 of them, dropped the 66,744 that were cancelled and the 44 that were never paid out, and followed the remaining 478,963 to June 30, 2026. By then 34,153 had been charged off: 7.1%.
The industries where loans fail most, and least
Highest: used car dealers, 12.3% charged off
Share of 7(a) loans approved in fiscal years 2010–2019 that had been charged off by June 30, 2026. The 12 highest of 73 industries with at least 1,500 loans.
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
Lowest: investment advice, 1.8% charged off
Same measure and same scale as the chart above. The 12 lowest of 73 industries.
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
The highest rate, 12.3% for used car dealers, is about 7 times the lowest, 1.8% for investment advisers.
Restaurants, the business everyone warns you about, are not in the top twelve. Limited-service restaurants (counter service and fast food) come in at 9.2%, 16th of 73. Full-service restaurants are 23rd, at 8.4%. That is worse than average, and nowhere near the worst.
The pattern at the two ends is easier to describe than to prove:
- At the bottom are businesses that borrow against something solid or sell something people keep needing: hotels, funeral homes, veterinary and dental practices, gas stations, child care centers. Their loans are large (the median hotel loan was $1,615,000), the kind of sum that is normally lent against property.
- At the top are businesses that are cheap to start and borrow small amounts for working capital: remodelers, online retailers, consultants, janitorial firms, painters. The median loan to a residential remodeler was $40,000.
Remodelers stand out for a second reason. Measured in dollars rather than loans, 10.2% of everything lent to them was charged off, the highest share of any industry in the table and more than three times the program-wide 2.9%.
Here is every industry with at least 1,500 loans. Click a column heading to sort.
| Used car dealers | 1,787 | 12.3% | 7.7% | 3.3% | $100,000 |
|---|---|---|---|---|---|
| Residential remodelers | 6,426 | 11.9% | 7.0% | 10.2% | $40,000 |
| Online retailers | 1,583 | 11.8% | 7.0% | 7.5% | $50,000 |
| Single-family home builders | 2,011 | 10.3% | 6.2% | 7.0% | $50,000 |
| Marketing consulting services | 1,880 | 10.2% | 6.0% | 4.8% | $50,000 |
| Gyms and fitness centers | 7,329 | 10.1% | 5.4% | 5.1% | $150,000 |
| Painting and wall covering contractors | 1,853 | 10.0% | 5.9% | 6.4% | $50,000 |
| Janitorial services | 2,657 | 10.0% | 6.3% | 4.6% | $75,000 |
| Supermarkets and grocery stores | 3,302 | 9.9% | 4.7% | 5.2% | $250,000 |
| Sporting goods stores | 2,492 | 9.9% | 5.5% | 4.8% | $90,000 |
| Management consulting | 2,209 | 9.8% | 5.9% | 5.4% | $50,000 |
| Dry cleaners and laundries | 2,391 | 9.7% | 4.4% | 5.9% | $160,000 |
| Specialized freight trucking, local | 1,610 | 9.6% | 6.2% | 4.7% | $50,000 |
| Miscellaneous store retailers | 2,839 | 9.3% | 6.0% | 4.1% | $82,600 |
| All other specialty food stores | 1,786 | 9.2% | 5.1% | 5.1% | $130,550 |
| Limited-service restaurants | 17,057 | 9.2% | 5.0% | 4.7% | $225,000 |
| Coffee, juice and snack bars | 4,142 | 9.0% | 5.5% | 5.5% | $150,000 |
| Other personal care services | 3,138 | 9.0% | 4.7% | 4.4% | $164,500 |
| Commercial and institutional building construction | 2,885 | 8.8% | 4.5% | 5.8% | $100,000 |
| All other amusement and recreation industries | 2,637 | 8.6% | 4.2% | 4.9% | $192,000 |
| Nail salons | 1,518 | 8.6% | 5.3% | 3.8% | $55,950 |
| Caterers | 1,622 | 8.5% | 4.9% | 3.2% | $80,000 |
| Full-service restaurants | 25,182 | 8.4% | 4.6% | 4.1% | $165,000 |
| All other personal services | 3,074 | 8.4% | 5.0% | 3.5% | $94,000 |
| General freight trucking, long-distance, truckload | 7,961 | 8.3% | 5.3% | 4.5% | $44,500 |
| General freight trucking, local | 6,403 | 8.2% | 5.3% | 4.3% | $45,000 |
| Beauty salons | 6,923 | 7.8% | 4.4% | 4.5% | $75,000 |
| Other miscellaneous nondurable goods merchant wholesalers | 1,750 | 7.6% | 4.1% | 2.7% | $200,000 |
| Computer systems design services | 2,362 | 7.4% | 4.1% | 3.9% | $83,500 |
| Home health care services | 2,923 | 7.2% | 4.5% | 3.6% | $143,000 |
| Electrical contractors and other wiring installation contractors | 3,611 | 7.1% | 3.6% | 4.6% | $75,000 |
| Other miscellaneous durable goods merchant wholesalers | 2,026 | 7.1% | 4.1% | 3.1% | $200,000 |
| All other specialty trade contractors | 6,763 | 7.0% | 3.8% | 4.3% | $100,000 |
| Automotive parts and accessories stores | 1,725 | 7.0% | 3.6% | 2.2% | $138,000 |
| Drinking places | 3,464 | 6.9% | 3.2% | 3.9% | $150,000 |
| Offices of all other miscellaneous health practitioners | 1,989 | 6.6% | 4.1% | 3.4% | $100,000 |
| Sports and recreation instruction | 1,665 | 6.6% | 3.9% | 1.7% | $100,000 |
| All other professional, scientific, and technical services | 3,444 | 6.5% | 3.1% | 3.2% | $150,000 |
| General automotive repair | 6,667 | 6.4% | 3.9% | 2.6% | $107,700 |
| Plumbing and HVAC contractors | 6,523 | 6.4% | 3.5% | 3.8% | $75,000 |
| Landscaping services | 6,884 | 6.4% | 3.6% | 3.9% | $50,000 |
| Convenience stores | 3,112 | 6.2% | 3.3% | 2.4% | $150,000 |
| Other computer related services | 2,298 | 6.0% | 3.2% | 3.5% | $127,600 |
| Chiropractors' offices | 4,879 | 5.8% | 3.2% | 4.1% | $98,000 |
| Pet care | 2,310 | 5.8% | 3.3% | 2.2% | $115,000 |
| Commercial and industrial machinery and equipment | 1,634 | 5.7% | 2.7% | 2.9% | $100,000 |
| Offices of real estate agents and brokers | 1,813 | 5.6% | 3.0% | 2.0% | $55,000 |
| Poured concrete foundation and structure contractors | 1,508 | 5.4% | 2.6% | 3.0% | $90,000 |
| Custom computer programming services | 2,564 | 5.4% | 2.9% | 2.6% | $100,000 |
| Pharmacies and drug stores | 3,180 | 5.3% | 2.3% | 2.8% | $350,000 |
| Breweries | 2,152 | 5.2% | 1.4% | 3.2% | $200,000 |
| CPA firms | 3,109 | 5.0% | 2.5% | 3.7% | $100,000 |
| Car washes | 2,195 | 5.0% | 2.3% | 1.2% | $745,000 |
| Automotive body, paint, and interior repair and maintenance | 2,427 | 4.9% | 2.6% | 1.8% | $135,000 |
| Machine shops | 2,067 | 4.9% | 2.2% | 2.2% | $225,000 |
| Law offices | 5,439 | 4.9% | 2.9% | 1.7% | $70,000 |
| Site preparation contractors | 2,827 | 4.7% | 2.4% | 3.3% | $80,000 |
| Insurance agencies and brokerages | 4,340 | 4.5% | 2.7% | 1.3% | $125,000 |
| Engineering services | 2,798 | 4.4% | 2.3% | 2.5% | $125,000 |
| Physicians' offices | 6,968 | 4.4% | 2.1% | 2.5% | $157,500 |
| Physical, occupational and speech therapists | 2,375 | 4.2% | 2.0% | 2.1% | $100,000 |
| Liquor stores | 5,340 | 4.2% | 1.9% | 2.0% | $260,500 |
| Coin laundries | 1,665 | 4.1% | 1.7% | 1.2% | $287,000 |
| Child care centers | 5,820 | 3.7% | 1.6% | 0.8% | $290,000 |
| Gas stations with convenience stores | 5,547 | 3.3% | 1.1% | 1.0% | $777,000 |
| Chicken farms (broilers) | 3,100 | 3.2% | 1.0% | 0.8% | $527,200 |
| Dentists' offices | 9,072 | 2.6% | 1.1% | 1.2% | $360,000 |
| Optometrists' offices | 1,724 | 2.6% | 0.8% | 1.1% | $195,000 |
| Hotels and motels | 7,706 | 2.4% | 0.6% | 1.1% | $1,615,000 |
| Commercial building landlords | 1,815 | 2.1% | 0.8% | 1.0% | $465,000 |
| Veterinary services | 3,951 | 2.0% | 0.9% | 0.8% | $494,000 |
| Funeral homes | 1,608 | 1.9% | 0.4% | 1.0% | $642,500 |
| Investment advice | 1,979 | 1.8% | 0.9% | 0.9% | $250,000 |
By sector
Individual industries are noisy. Grouped into the broad sectors the government uses, the order is steadier.
By sector, charge-offs run from 4.2% to 9.2%
Share of 7(a) loans approved in fiscal years 2010–2019 that were charged off, by industry sector (sectors with at least 1,000 loans)
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
Show the numbers as a table
| Sector | Loans | Charged off |
|---|---|---|
| Arts, entertainment and recreation | 14,045 | 9.2% |
| Transportation and warehousing | 25,287 | 8.9% |
| Wholesale trade | 25,212 | 8.4% |
| Retail trade | 65,660 | 8.1% |
| Construction | 50,174 | 7.9% |
| Accommodation and food services | 62,651 | 7.8% |
| Educational services | 6,684 | 7.6% |
| Administrative and support services | 22,159 | 7.3% |
| Other services (repair, personal care) | 42,853 | 7.1% |
| Information | 5,655 | 7.1% |
| Mining, oil and gas | 1,373 | 6.8% |
| Professional and technical services | 47,323 | 6.4% |
| Manufacturing | 37,961 | 6.3% |
| Real estate, rental and leasing | 10,446 | 5.0% |
| Health care and social assistance | 44,707 | 4.5% |
| Agriculture, forestry and fishing | 7,815 | 4.4% |
| Finance and insurance | 8,161 | 4.2% |
Loan size matters as much as industry
The smallest loans were charged off 2.9 times as often as the largest
Share of 7(a) loans approved in fiscal years 2010–2019 that were charged off, by original loan amount
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
Show the numbers as a table
| Loan size | Loans | Charged off |
|---|---|---|
| $25,000 or less | 92,115 | 9.3% |
| $25,001–$50,000 | 68,481 | 7.4% |
| $50,001–$150,000 | 112,779 | 8.2% |
| $150,001–$350,000 | 84,492 | 6.8% |
| $350,001–$1 million | 72,984 | 5.1% |
| $1–$2 million | 31,029 | 4.2% |
| $2–$5 million | 17,083 | 3.2% |
Loans of $25,000 or less were charged off 2.9 times as often as loans over $2 million. This is tangled up with the industry ranking: the industries at the top of the list are mostly the ones that take small loans. We have not separated the two effects, so do not read the industry table as "this business is risky at any size."
Failure is slow
Failures come late: 0.6% charged off after two years, 3.7% after five, 6.5% after ten
Cumulative share of 7(a) loans charged off, by years since approval. Loans approved in fiscal years 2010–2015, which all have at least ten years of history.
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
Show the numbers as a table
| Time since approval | Cumulative share charged off |
|---|---|
| 0 years | 0.00% |
| 0.5 years | 0.00% |
| 1 years | 0.05% |
| 1.5 years | 0.25% |
| 2 years | 0.64% |
| 2.5 years | 1.09% |
| 3 years | 1.59% |
| 3.5 years | 2.13% |
| 4 years | 2.70% |
| 4.5 years | 3.22% |
| 5 years | 3.71% |
| 5.5 years | 4.22% |
| 6 years | 4.64% |
| 6.5 years | 5.04% |
| 7 years | 5.39% |
| 7.5 years | 5.68% |
| 8 years | 5.94% |
| 8.5 years | 6.13% |
| 9 years | 6.29% |
| 9.5 years | 6.41% |
| 10 years | 6.53% |
Almost nothing is charged off in the first year. The curve is still climbing in year ten.
Among charged-off loans, the median time from approval to charge-off was 4.7 years. 45% of charge-offs came more than five years after the loan was approved, and only 10% in the first two.
Part of that delay is process: the write-off is recorded at the end of collection, not on the day the payments stop. But the practical point holds. A business that has made two years of payments has not proved the loan is safe.
Which years did worst
Loans made in FY2013 did best; the years since have been worse
Share of 7(a) loans charged off within five years of approval, by fiscal year approved
Source: The Mercantile Record analysis of SBA 7(a) loan records as of June 30, 2026. Method.
Show the numbers as a table
| Approved in | Loans | Charged off within 5 years | Within 7 years | Charged off to date | Still outstanding |
|---|---|---|---|---|---|
| FY2010 | 39,913 | 4.9% | 7.3% | 9.2% | 1.6% |
| FY2011 | 45,628 | 3.6% | 5.3% | 6.9% | 2.2% |
| FY2012 | 38,889 | 3.3% | 4.9% | 6.3% | 2.9% |
| FY2013 | 40,416 | 3.1% | 4.6% | 6.0% | 4.1% |
| FY2014 | 45,962 | 3.5% | 4.9% | 6.4% | 4.5% |
| FY2015 | 55,421 | 3.9% | 5.4% | 6.9% | 5.9% |
| FY2016 | 56,789 | 3.9% | 5.8% | 7.2% | 9.4% |
| FY2017 | 56,079 | 4.3% | 6.2% | 7.7% | 16.0% |
| FY2018 | 54,195 | 4.7% | 6.8% | 7.9% | 22.1% |
| FY2019 | 45,671 | 3.9% | – | 6.7% | 30.8% |
To compare years fairly we count only charge-offs in the first five years after approval. Loans approved in fiscal 2010, just after the financial crisis, did worst: 4.9%. The best year was fiscal 2013, at 3.1%. Every year from 2014 to 2018 was worse than the one before, and fiscal 2018 loans, at 4.7%, nearly matched the crisis-era figure. Fiscal 2019 came in lower, at 3.9%.
The older years are close to final. The newer ones are not: 31% of fiscal 2019 loans are still being repaid, and some of those will fail.
Startups, franchises and buying a business
| Borrower | Loans | Charged off | Within 5 years |
|---|---|---|---|
| Startup (loan opens the business) | 72,415 | 8.5% | 4.8% |
| Under 2 years old | 45,991 | 8.2% | 4.9% |
| 2 to 5 years old | 72,761 | 8.1% | 4.6% |
| 5 years or older | 188,514 | 5.8% | 2.9% |
| Existing, over 2 years (FY2018–19 label) | 45,750 | 7.3% | 4.3% |
| Buying an existing business (FY2018–19 label) | 9,572 | 4.5% | 2.2% |
| Franchise | 42,558 | 8.7% | 4.6% |
| Not a franchise | 436,405 | 7.0% | 3.9% |
Loans to brand-new businesses were charged off more often than loans to businesses at least five years old, 8.5% against 5.8%. The gap is real but smaller than folklore suggests.
Franchise loans did worse than non-franchise loans, 8.7% against 7.0%. A franchise is not a safer kind of startup in these records.
SBA changed the wording of this question in fiscal 2018, which is why two rows carry a "FY2018–19" label. They cannot be merged cleanly with the older categories.
If you are about to borrow
These are base rates for groups of loans. They say nothing about your business in particular. They are still worth knowing, for four reasons.
Your lender knows them. A lender looking at a used car lot or a remodeling company has the same records we do. It is reasonable to expect closer questions than a dental practice would get.
The loss is personal. SBA's rules require anyone who owns 20% or more of the borrowing business to guarantee the whole loan personally. When a loan in these records was charged off, the median amount written off was 78% of the original loan. By the time a loan fails, little of it has been repaid or recovered.
A loss follows you. Under the same rules, a business is not eligible for another 7(a) or 504 loan if the applicant, or another business the applicant owned or controlled, defaulted on a federal loan and left the government with a loss. The bar lifts only if the loss is repaid in full.
The danger years come late. Plan the loan around years three to seven, not the first twelve months. The 7(a) calculator shows what the payment becomes if rates rise.
What these numbers are not
- Not default rates. Charge-offs are the last step. Loans in default but not yet charged off are hidden: SBA lists every loan that is neither paid, cancelled nor charged off under one status that does not distinguish healthy from delinquent.
- Not final. 10% of these loans are still outstanding, many of them with terms of 20 years or more. The eventual rates will be higher than the ones shown.
- Not adjusted for anything. Industry, loan size, business age and year all overlap. Each table looks at one at a time.
- Not broken down by loan term, though we wanted to. In SBA's file the "term in months" field is overwritten once a loan is charged off, so it no longer shows the original term. Any analysis of charge-offs by term from this file would be wrong.
- Not a count of failed businesses. A business can close and still repay its loan, and a loan can be charged off while the business carries on.
- Industry codes are entered by lenders and the classification changed twice in the period. We grouped loans by SBA's industry description, which merges codes that were renumbered.
- Cancelled loans are excluded. They were 12% of approvals.
Method in brief
We used SBA's public file of 7(a) loans approved in fiscal years 2010 through 2019, dated June 30, 2026. We removed loans marked cancelled or never disbursed. A loan counts as charged off if its status is "charged off." "Within five years" uses the days between the approval date and the charge-off date. The curve of failures over time uses loans approved in fiscal 2010 to 2015, all of which have at least ten years of history. Industries are listed only if they had at least 1,500 loans. The full method and downloadable tables are on the data page.
Sources
- 7(a) & 504 FOIA dataset, U.S. Small Business Administration. Loan-level records and data dictionary as of June 30, 2026. Every count and rate in this article comes from the fiscal 2010–2019 file. Checked October 5, 2026.
- SOP 50 10 8.1, Lender and Development Company Loan Programs, U.S. Small Business Administration. Effective October 1, 2026. Personal guaranty requirement for owners of 20% or more; the prior-loss eligibility rule. Checked October 5, 2026.
Corrections and updates
- First published.