$3B in Distressed Acquisition Loans

$3 billion in SBA acquisition loans are currently in distress. Not defaults. Not chargeoffs. Active distress - right now. We've never been able to see this before. The SBA just replaced the "EXEMPT" catch-all in their FOIA data with seven granular servicing statuses. The official data dictionary hasn't been updated. But the data has. 2,264 acquisition loans sitting in past due, delinquent, liquidation, or SBA-purchased status. That's 8.5% of every active SBA acquisition loan in the country. The average distressed loan is $1.3 million. Some things that jumped out: - FY2022-2023 vintage loans show 9-10% distress rates - the worst in the dataset - Those vintages line up with the rate hike cycle. Prime went from 3.25% to 8.5% - 1,107 acquisition loans have already been purchased by the SBA but haven't charged off yet - Deferred loans average $1.9 million - the largest in the portfolio FY2024 is worth watching. Already at 5.7% distress and those loans haven't had a full year of payments. 91.5% of the acquisition portfolio is performing fine. But which side of that line you land on has everything to do with the lender you choose, the rate you lock, and how you structure the deal. Max leverage with a variable rate at the top of a rate cycle isn't a strategy anymore - it's a bet. And this data shows what happens when that bet doesn't work.