Answer
How often do small business loans actually fail?
The real charge-off rate on mature SBA cohorts, how it varies by sector, and what it means for your own decision.
Across SBA 7(a) loans approved in fiscal years 2010 through 2019 — old enough to have run their course — roughly 7.1% ended in charge-off. The overwhelming majority of small business loans are repaid, but the rate varies sharply by industry.
The headline number
This is computed from the SBA's own loan-level FOIA release, restricted to fiscal years 2010 through 2019. That restriction matters: a loan approved in 2025 has not had time to fail, so including recent years would understate the true rate dramatically. Anyone quoting a default rate without saying which cohort it covers is quoting a meaningless number.
It varies enormously by sector
| Sector | Charge-off rate | Loans in cohort | Median loan today |
|---|---|---|---|
| Arts, entertainment, and recreation | 9.2% | 14,045 | $231,350 |
| Transportation and trucking | 8.9% | 25,288 | $91,800 |
| Wholesale trade | 8.4% | 25,215 | $224,500 |
| Retail | 8.1% | 65,665 | $200,000 |
| Construction and contracting | 7.9% | 50,182 | $150,000 |
| Restaurants, bars, and hotels | 7.8% | 62,651 | $305,000 |
| Educational services | 7.6% | 6,684 | $150,000 |
| Administrative and support services | 7.3% | 22,162 | $150,000 |
| Personal and repair services | 7.2% | 42,855 | $150,000 |
| Information and media | 7.1% | 5,656 | $150,000 |
| Mining and extraction | 6.8% | 1,373 | $300,000 |
| Professional and technical services | 6.4% | 47,334 | $150,000 |
| Manufacturing | 6.3% | 37,965 | $248,000 |
| Utilities | 5.5% | 402 | $150,000 |
| Real estate and rental | 5.0% | 10,446 | $150,000 |
| Health care and social assistance | 4.5% | 44,713 | $215,000 |
| Agriculture and farming | 4.4% | 7,815 | $162,600 |
| Finance and insurance | 4.2% | 8,161 | $184,500 |
| Management of companies | 2.2% | 312 | $654,500 |
That spread is why lenders maintain industry restrictions, and why a decline sometimes has nothing to do with your business specifically. If your sector sits at the high end of that table, expect more scrutiny, a larger injection requirement, and a shorter list of willing lenders — none of which is a judgment about you.
What this should change about your decision
- Take the personal guarantee seriously. You are signing for the tail case. Most borrowers never face it; you are agreeing to be liable if you do.
- Size the loan to survive a bad year, not to fund the best case. Coverage of 1.25x exists precisely because forecasts are wrong.
- Match term to asset life. A significant share of failures trace back to short money funding a long-lived need.
- Do not borrow against a structural problem. If the business is not profitable at current volume, financing accelerates the outcome rather than changing it.
How to read anyone else's default statistics
- Which cohort? Rates computed including recent approvals are always flattering.
- Charge-off or delinquency? They are very different numbers.
- Which program? 7(a) and 504 behave differently, and non-SBA lending is largely unmeasured because nobody publishes it.
- Loans or dollars? A charge-off rate by count differs from one by dollar volume, because loan sizes vary so widely.
Every figure on this page is by loan count, from FY2010-2019 approvals, SBA 7(a) only. Our methodology page explains how we handle this kind of data generally.
Questions people actually ask
What percentage of SBA loans default?
Roughly 7.1% of SBA 7(a) loans approved between fiscal 2010 and 2019 ended in charge-off, measured by loan count from the SBA's loan-level FOIA data. Recent approvals are excluded because they have not had time to season.
Is the default rate higher for startups?
Generally yes, which is why startup borrowers face larger injection requirements and a shorter list of willing lenders. It is also why an SBA guarantee matters so much at that stage -- it is what makes a lender willing to take the risk at all.
Does a high industry default rate mean I will be declined?
No, but it changes the terms of the conversation. Expect more scrutiny of your projections, possibly a larger down payment, and a shorter list of lenders who will touch your NAICS code. Ask lenders directly whether they lend in your sector before assembling a package.