Default rates for SBA Loans

by an investor from The University of Chicago - Booth School of Business

3 years ago

I've often heard people say that SBA loans have default rates below 2%. This has been used as a justification for highly leveraged acquisitions ~90% LTV and to minimize the risk of personal guarantees. But then I see the figures in the article linked below that "More than 1 in 6 loans (17.4%) awarded from 2006 through 2015 went into default..." In specific sectors the default rate is much higher, like 42.8% in multi-family housing construction. Does anyone have a comment from experience or hard data on this?
https://www.nerdwallet.com/article/small-business/study-1-in-6-sba-small-business-administration-loans-fail

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searcher from The University of Chicago - Booth School of Business

When you look at the raw data, the rates are lower than that, especially for larger loans. Would recommend to pull the data directly yourself from https://data.sba.gov/en/dataset/7-a-504-foia and narrow it down to the right NAICS / deal size for a more accurate read.

7 months ago | like reply | 0 likes

searcher from Missouri University of Science and Technology

Great article.

3 years ago | like reply | 0 likes

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