SBA Loan Default Rate Analysis
Of 2,136,870 SBA loans since 1992, 228,228 were charged off — a 12.4% count-based rate, but only 4.0% when measured by dollars. The full story is more nuanced than any single number.
Why the Headline Number Needs Context
A 12.4% default rate sounds alarming, but this number spans 33 years of lending history (1992–2025) across very different economic conditions. It mixes the 2008 financial crisis (when default rates spiked above 25%) with recent years where loans are too new to have defaulted yet.
The dollar-weighted loss rate is only 4.0% — meaning for every dollar the SBA loaned, only about 4 cents were lost. Larger loans (which represent more capital) default far less often.
All SBA Loans by Status
What “Charged Off” Actually Means
Active — Loan is currently being repaid
Paid in Full — Borrower successfully repaid the loan
Charged Off — Borrower defaulted; lender took a loss. But “charged off” does not mean 100% loss — the SBA guarantee covers 67% on average, and lenders often recover partial amounts through collateral.
Cancelled — Loan was approved but never disbursed (excluded from default rate)
Committed — Approved and in process of being funded (excluded from default rate)
The Full Picture: Count vs. Dollars
Two Ways to Measure Default Risk
Count-based rate treats every loan equally — a $25,000 microloan and a $5 million expansion loan each count as one default. This is useful for understanding how often loans fail.
Dollar-weighted rate measures actual capital at risk — how many cents per loaned dollar were lost. Since larger loans default less often, this rate is almost always lower and better reflects overall program health.
When Do Defaults Happen?
Why Recent Loans Look Safe (They're Just Young)
A loan approved in 2024 has only had about 1 year to potentially default. A loan from 2005 has had 20 years. Most defaults happen between years 2 and 5 of the loan term. So when you see recent loans with a 3% default rate, that number will climb as those loans age.
The vintage cohort chart below shows this clearly: every generation of loans follows a similar pattern, regardless of when they were approved.
When Do Defaults Happen?
Time between loan disbursement and charge-off. The peak danger zone is years 2–5. Median time to default: 4.1 years (49.3 months).
Loan Cohort Maturity — Why Newer Loans Look “Safer”
Each dot is a year of loans. The X-axis shows how old those loans are now. Younger cohorts (right side) simply haven't had time to accumulate defaults yet.
| Era | Loans | Avg Age | Default Rate | $ Loss Rate |
|---|---|---|---|---|
| Pre-2000 | 352,632 | 30 yrs | 11.3% | 4.8% |
| 2000-2007 | 639,893 | 22 yrs | 23.0% | 11.5% |
| 2008-2012 | 296,590 | 15 yrs | 13.8% | 5.6% |
| 2013-2019 | 444,174 | 9 yrs | 6.3% | 2.0% |
| 2020-Present | 403,581 | 2 yrs | 1.5% | 0.3% |
Default Rate Over Time
Adjusted default rate by fiscal year. Note the spike during the 2008 financial crisis and the low rates in recent years (which will rise as newer loans mature).
Adjusted Default Rate by Year
Risk by Geography
Default Rates by State
Adjusted default rate — darker colors indicate higher default rates. Click any state for detail.
Highest Default Rate States
Lowest Default Rate States
Risk by Industry
Default Rates by Industry
Which industries have the highest percentage of charged-off loans?
Default Rate Heatmap: Industry x Loan Size
| Industry | Under $150K | $150K–$350K | $350K–$500K | $500K–$1M | $1M–$2M | $2M–$5M | $5M+ |
|---|---|---|---|---|---|---|---|
| Agriculture, Forestry, Fishing & Hunting | 7.2% | 5.8% | 8.0% | 12.8% | 4.7% | 2.0% | 0.0% |
| Mining, Quarrying & Oil/Gas Extraction | 8.9% | 6.5% | 6.2% | 8.2% | 11.2% | 3.7% | 3.5% |
| Utilities | 12.1% | 6.2% | 6.2% | 2.2% | 4.2% | 0.0% | 0.0% |
| Construction | 15.5% | 8.1% | 7.6% | 7.8% | 7.3% | 3.3% | 0.5% |
| Manufacturing | 15.1% | 9.2% | 8.8% | 8.3% | 8.4% | 4.0% | 1.1% |
| Wholesale Trade | 21.2% | 8.6% | 7.6% | 7.0% | 5.6% | 2.1% | 1.1% |
| Retail Trade | 20.3% | 12.7% | 10.2% | 9.1% | 7.7% | 2.7% | 1.0% |
| Transportation & Warehousing | 15.3% | 8.3% | 7.8% | 6.6% | 5.7% | 2.8% | 0.0% |
| Information | 20.1% | 9.3% | 9.0% | 8.3% | 7.7% | 3.4% | 0.0% |
| Finance & Insurance | 18.6% | 5.1% | 5.0% | 4.4% | 4.5% | 1.3% | 0.0% |
| Real Estate & Rental/Leasing | 21.4% | 7.9% | 6.7% | 6.4% | 4.3% | 2.2% | 1.4% |
| Professional, Scientific & Technical Services | 14.4% | 5.9% | 5.3% | 4.9% | 4.2% | 1.7% | 0.9% |
| Management of Companies & Enterprises | 12.2% | 3.6% | 2.1% | 2.2% | 1.2% | 0.0% | — |
| Administrative & Support Services | 15.9% | 7.5% | 6.3% | 6.1% | 5.6% | 2.6% | 1.9% |
| Educational Services | 14.5% | 9.8% | 5.3% | 5.3% | 4.4% | 1.1% | 0.0% |
| Health Care & Social Assistance | 8.9% | 5.5% | 5.1% | 5.4% | 4.3% | 1.5% | 0.3% |
| Arts, Entertainment & Recreation | 15.2% | 11.8% | 9.7% | 9.6% | 9.6% | 3.4% | 0.8% |
| Accommodation & Food Services | 16.4% | 14.6% | 11.6% | 10.0% | 9.5% | 3.5% | 1.0% |
| Other Services | 15.8% | 10.3% | 8.8% | 7.4% | 6.5% | 1.9% | 0.0% |
| Public Administration | 14.4% | 9.5% | 9.1% | 5.9% | 0.0% | — | — |
Risk by Loan Characteristics
Default Rates by Loan Size
Are bigger loans riskier? The data suggests the opposite.
Default Rates by Business Age
Startups vs. established businesses — how does business maturity affect default risk?
Default Rates by SBA Program Type
Not all SBA loans are the same. Express loans have different underwriting standards than standard guaranty loans.
What This Means If You're a Borrower
How to Read This Data as a Small Business Owner
These numbers represent averages across 2.1 million loans over 34 years. Your individual loan risk depends on factors specific to your situation: your industry, your business age, your loan size, your lender, and the economic conditions when you borrow.
The overall 12.4% default rate includes the 2008 financial crisis, when defaults peaked above 25%. It also includes young loans that haven't had time to default. Your actual risk is likely very different from the headline number.
Key takeaways for borrowers:
- Larger loans default less often — the dollar-weighted loss rate is only 4.0%
- Most defaults happen in years 2–5. If you survive that period, your risk drops significantly.
- Your industry matters — default rates range from 5.0% to 15.9%
- “Charged off” doesn't mean you lose everything — the SBA guarantee covers an average of 67% of the loan.
Methodology & Definitions
Charged Off (CHGOFF)
The borrower defaulted and the lender wrote off the remaining balance. This does not mean 100% loss — the SBA guarantee (averaging 67%) covers a significant portion, and lenders may recover funds through collateral.
Adjusted Default Rate
Excludes cancelled and committed loans from the denominator. These loans were never disbursed, so including them would artificially lower the rate. Answers: “Of loans that were actually funded, what percentage defaulted?”
Dollar-Weighted Loss Rate
Instead of counting loans equally, this measures total charge-off dollars ($28.8B) divided by total approval dollars ($727.0B). This better reflects the actual capital at risk.
Vintage Cohort Analysis
Groups loans by approval year and tracks their default rates as they age. This reveals that recent loans appear safer mainly because they haven't had enough time to default — not because lending quality improved.
Recency Bias Caveat
Loans approved after 2020 show low default rates (around 1.5%), but this is largely because they are only 1–5 years old. Most defaults occur between years 2 and 5. These rates will climb as loans mature.
Data Source
U.S. Small Business Administration FOIA data as of December 31, 2025. Covers all SBA 7(a) and 504 loans since fiscal year 1992. Time-to-default analysis has 100% date coverage (228,034 of 228,228 charged-off loans had valid disbursement and charge-off dates).