Everyone can agree that SBA loans aren’t easy to get. You need to have good credit and a profitable business or business idea, and you must be willing to put in the time and paperwork needed to get an SBA loan. So when all is said and done, who gets SBA loans? The tables below show which types of businesses are most and least successful at getting SBA loans and, even more important, paying them back on time. The rankings are based on data from 2006 to 2015 that we obtained directly from the Small Business Administration (SBA).
Below, we explain what you can learn from the data and how to improve your chances of getting approved for an SBA loan.
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Top 10 Types of Businesses By Number of SBA Loans
Ranking | Type of Business | # of SBA 7a Loans from 2006-2015 | Volume of SBA 7a Loans from 2006-2015 | Average Loan Size (# Divided by Volume) | % of Loans That are Repaid |
|---|---|---|---|---|---|
1 | Full Service Restaurants | 22384 | $5,899,951,231 | $263,579 | 53.99 % |
2 | Limited Service Restaurants | 16577 | $3,948,264,568 | $238,177 | 53.49 % |
3 | Dentist Offices | 10883 | $4,853,110,585 | $445,935 | 63.27 % |
4 | Beauty Salons | 9317 | $1,038,667,426 | $111,481 | 55.29 % |
5 | Doctor Offices (except Mental Health Specialists) | 8758 | $2,962,850,742 | $338,302 | 67.06 % |
6 | Specialty Trade Contractors | 8660 | $1,552,975,593 | $179,327 | 58.27 % |
7 | General Automotive Repair | 8417 | $1,654,490,979 | $196,565 | 51.96 % |
8 | Gas Stations with Convenience Stores | 8195 | $5,935,935,507 | $724,336 | 45.69 % |
9 | Landscaping Services | 8133 | $975,903,633 | $119,993 | 62.10 % |
10 | General Freight Trucking, Local | 7288 | $774,031,128 | $106,206 | 55.66 % |
Top 10 Types of Businesses By Volume of SBA Funding
Ranking | Type of Business | Volume of SBA 7a Funding Received from 2006-2015 | Average Loan Size (# Divided by Volume) |
|---|---|---|---|
1 | Hotels (except Casino Hotels) and Motels | $9,791,800,061 | $1,480,690 |
2 | Gas Stations with Convenience Stores | $5,935,935,507 | $724,336 |
3 | Full-Service Restaurants | $5,899,951,231 | $263,579 |
4 | Dentist Offices | $4,853,110,585 | $445,935 |
5 | Limited-Service Restaurants | $3,948,264,568 | $238,177 |
6 | Child Day Care Services | $3,151,765,078 | $458,439 |
7 | Veterinary Services | $3,121,984,318 | $670,673 |
8 | Doctor Offices (except Mental Health Specialists) | $2,962,850,742 | $338,302 |
9 | Beer, Wine, and Liquor Stores | $2,326,337,236 | $366,064 |
10 | Broilers and Other Meat Processing Businesses | $2,101,377,455 | $716,216 |
Types of Businesses with Highest SBA Loan Repayment Rates
Ranking | Type of Business | # of SBA 7a Loans from 2006-2015 (excluding currently outstanding loans) | # of Loans that were Paid in Full | SBA Loan Repayment Rate* |
|---|---|---|---|---|
1 | Broilers and Other Meat Processing Businesses | 1183 | 907 | 76.67 % |
2 | Highway, Street, and Bridge Construction Businesses | 596 | 426 | 71.48 % |
3 | Engineering Services | 2156 | 1466 | 68.00 % |
4 | Optometrist Offices | 1029 | 695 | 67.54 % |
5 | Scientific and Technical Consulting Services | 843 | 568 | 67.38 % |
6 | Law Practices | 3271 | 2198 | 67.20 % |
7 | Doctor Offices (except Mental Health Specialists) | 4505 | 3021 | 67.06 % |
8 | Offices of Physical, Occupational and Speech Therapists, and Audiologists | 1341 | 894 | 66.67 % |
9 | Miscellaneous Fabricated Metal Product Manufacturing | 682 | 451 | 66.13 % |
10 | Home Health Care Services | 1354 | 891 | 65.81 % |
*Loan repayment rate is equal to the number of loans that were paid in full divided by the number of loans (excluding loans that are currently outstanding). We excluded outstanding loans when calculating the repayment rate because we don’t know if those loans will be repaid by their maturity date. Also, please note that this table only considers types of businesses that received at least 1,000 SBA loans (including outstanding loans) from 2006-2015.
Types of Businesses with Highest SBA Loan Default Rates
Ranking | Type of Business | # of SBA 7a Loans 2006-2015 (excluding currently outstanding loans) | # of Loans that Were Charged Off or Canceled | SBA Loan Default Rate* |
|---|---|---|---|---|
1 | Mortgage and Nonmortgage Loan Brokers | 929 | 683 | 73.52 % |
2 | Residential Property Managers | 919 | 554 | 60.28 % |
3 | Offices of Real Estate Agents and Brokers | 2641 | 1540 | 58.31 % |
4 | General Merchandise Stores | 1106 | 630 | 56.96 % |
5 | Cosmetics, Beauty Supplies, and Perfume Stores | 1047 | 576 | 55.01 % |
6 | Used Car Dealers | 1268 | 691 | 54.50 % |
7 | Car Washes | 1219 | 664 | 54.47 % |
8 | Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers | 910 | 495 | 54.40 % |
9 | Gas Stations with Convenience Stores | 3883 | 2109 | 54.31 % |
10 | Family Clothing Stores | 691 | 368 | 53.26 % |
*Loan default rate is equal to the number of loans that were charged off or canceled (i.e. settled for less than the amount owed) divided by the number of loans (excluding loans that are currently outstanding). We excluded outstanding loans when calculating the default rate because we don’t know if those loans will be repaid by their maturity date. Also, please note that this table only considers types of businesses that received at least 1,000 SBA loans (including outstanding loans) from 2006-2015.
What Can We Learn From This Data?
The four tables of data above give us a good look at how successful different types of businesses were at getting SBA loans and paying back SBA loans. However, it’s important to look at the data in context. Here are a few examples of what we mean:
- Restaurants – The conventional wisdom is that lenders don’t like to give loans to restaurants because they are riskier than other types of businesses. The data, however, casts doubt on this. Full service restaurants and limited service restaurants by far got the largest number of SBA loans between 2006 and 2015. They came in at numbers 3 and 5, respectively, in terms of their volume of SBA funding. The average loan size was $263,579 for full service restaurants and $238,177 for limited service restaurants. This is smaller than the average loan size for hotels, dental offices, and other businesses. This suggests that restaurants do get lots of SBA loans but that their loan size may not be that high.
- Hotels – Hotels did not make it into the top 10 in terms of the number of SBA loans (they were number 15). However, they were number 1 in terms of the volume of funding. This is the reverse of what we noticed with restaurants. Hotels didn’t get too many loans, but when they did, they received a large amount of money. This may be because they can collateralize the loan with real estate. The average loan size for hotels was $1,480,690.
- Meat Processing and Construction Businesses – Broiler businesses, other meat processing businesses, and construction businesses were the most successful in repaying SBA loans. Almost three quarters of loans going to these types of businesses were paid back in full and on time. Despite how successful these businesses were in paying back loans, however, they didn’t receive too many loans or a large volume of funding.
All of this shows that, at the end of the day, you have to look at a combination of metrics–number of SBA loans, volume of SBA funding, and default rate–to really understand how ‘successful’ a business is when it comes to SBA loans.
Why Is It Easier for Some Types of Businesses To Get Loans Than Others?
No matter what type of business you have, the main thing that lenders care about when they give a business a loan is the business owner’s ability to pay it back. That’s ultimately what determines who gets SBA loans.
The “ideal” business will have the following features:
- High owner credit score – To qualify for an SBA loan, you generally need to have a personal credit score of 660 or higher. In businesses that are perceived as riskier, such as restaurants, you may have to have an even higher credit score. If you’re unsure of your credit score, click here to check for free.
- Established business – In general, SBA loans go to businesses that have been operating for at least 2 years. It’s harder, but not impossible, to get an SBA loan to start a new business or buy an existing business. For new businesses or to buy an existing business, you should generally have experience in the industry and a 10-20 % down payment.
- High revenues & profitability – Your revenues and profits must be strong to qualify for an SBA loan.
- Lots of Collateral – The more collateral you can bring to the table, the higher chance you have of qualifying for a loan. This is why hotels, gas stations, and other types of businesses that are property-rich and equipment-rich often succeed in getting SBA loans. However, even if you’re opening a type of business that doesn’t have much collateral, you can pledge personal assets such as your home or car.
- Business’ Debt Service Coverage Ratio (DSCR) Over 1.25 – You typically need to have a DSCR of 1.25 or higher to get approved for an SBA loan. DSCR is the business’ net operating income divided by the business’ loan and interest payments.
If you meet the above 5 requirements, you should be able to qualify for an SBA loan regardless of what industry you’re in (note: certain industries are categorically excluded from receiving SBA loans).
If you don’t meet those requirements, there are many alternatives to SBA loans for existing businesses and new businesses.
Bottom Line
Getting an SBA loan is easier in certain industries than in others. However, sometimes businesses that are successful in obtaining an SBA loan are not successful in paying it back on time. Our data above shows you which types of businesses are most likely to get SBA loans and pay them back on time. Ultimately, who gets SBA loans depends on a specific business’ circumstances and the lender’s evaluation of its ability to pay back the loan.
Want access to the raw data we received from the SBA? We’re happy to share it. Please email us at pprakash@fitsmallbusiness.com.
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