I was reading this article today. I hadn't seen an analysis like it before
https://www.nerdwallet.com/article/small-business/study-1-in-6-sba-small-business-administration-loans-fail
I had known the stat of 1-2% SBA loans default per year, but
-- 1 in 6 SBA loans overall default
-- Landscaping is one of the industries with the highest SBA loan volume
-- ###-###-#### cumulative Landscaping loan default rate was 15.82% (1,020 defaults out of 6,449 loans)
This seemed really high. It included the time period of the great recession which probably had some landscapers exposed to residential sub-prime
Has anyone heard of done actual further analysis on the reasons for default? Some hypotheses below which are not supported by data:
---- Over-leveraged purchase (too low coverage ratio, purchase multiple was too high, etc)
---- General Buyer was unable to manage the business?
---- Too much project rather than recurring exposure?
---- Poor / incorrect diligence work? (e.g. not understanding the amount of capex replacement needed, or actual fraud in Seller representations?)
---- Loss of a major one or more clients?
---- Seller competing with buyer after 5 (or less) year non-compete expires?
---- Do smaller landscapers default more?
---- Do single-family-focused landscaping firms default more?
---- Certain areas of the country defaulting more?
---- Abnormal event puts company out of business (e.g. flood destroys facility, fire destroys customer structure, excessive snow and no cap to customer snow coverage in contract, etc)
What factors lead Landscaping companies to default on SBA loans?
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by a searcher from Harvard University - Harvard Business School
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