Who Gets SBA Loans? SBA Loans by Industry

Small Business Administration (SBA) loans are a common source of financing for businesses. However, many businesses find qualifying for SBA loans to be difficult. Using data from the SBA, we have broken down SBA loans by industry to find which are receiving the most loans, the most funding, and which have the highest repayment rates.

SBA Loans by Industry: Number of SBA Loans Approved

Using SBA 7(a) loan data provided by the SBA, we’ve compiled a list of the top 10 SBA loans by industry type. This was determined by the number of SBA loans received in each industry between 2010 and 2018. For each industry, we have included the number of loans received, the amount of SBA loan dollars received, the average loan size, and the repayment percentage. Based on this information, full-service restaurants were the top industry to receive SBA loans during this time.

Top 10 SBA Loans by Industry: Number of SBA Loans Approved from 2010 to 2018

How the Top 10 SBA Loans by Industry Compare

The top two industries receiving loans from the SBA between 2010 and 2018 were full-service and limited-service restaurants. These two industries accounted for more than 43,000 of the SBA loans approved between 2010 and 2018, and more than $11 billion in SBA guaranteed loans.

SBA Loans by Industry: Funding Volume

To delve into who is receiving SBA 7(a) loans by industry further, we also considered which industries received the highest amount of SBA loan dollars between 2010 and 2018. This was determined by evaluating the cumulative loan approval amount for each industry during this time period. Based on this data, hotels and motels received the most SBA loan funding between 2010 and 2018.

Top 10 SBA Loans by Industry: Funding Volume from 2010 to 2018

How the Top 10 SBA Loans by Industry & Funding Volume Compare

Despite full-service restaurants receiving the highest number of SBA 7(a) and Express loans, the industry that received the highest volume of SBA loan dollars was the hotel industry. Businesses in the hotel industry received nearly $11 billion in SBA loan funds between 2010 and 2018, with an average loan size of $1.4 million.

Highest SBA Loan by Industry Repayment Rates

To determine how SBA loans by industry compared further, we evaluated which industries have the highest repayment rates. Repayment rates were determined by calculating the total number of SBA loans that were discharged between 2010 and 2018 and dividing that by the number of loans that were paid in full by the borrower. Discharged loans are those that were closed out due to full repayment, cancellation, or charge off. The industry with the highest repayment rate between 2010 and 2018 was the broiler and other meat-type industry.

Highest SBA Loan by Industry Repayment Rates From 2010 to 2018

*Loan repayment rate is equal to the number of loans that were paid in full divided by the number of loans, excluding loans 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 the types of businesses that received at least 500 SBA loans between 2010 and 2018.

How the Top 10 SBA Loans by Industry and Repayment Percentage Compare

Interestingly, the industry with the highest repayment rate on SBA loans is the broiler and other meat industry, which is an industry focused on raising and processing chickens for meat. The broiler and other meat-type industry had a repayment rate of 81.79% on SBA loans during the time period between 2010 and 2018.

SBA Loans By Industry: Highest Default Rates

In a further comparison of SBA loans by industry type, we ranked industries by their SBA default rate. This was calculated by comparing the total number of loans discharged from 2010 to 2018 to the number of loans that were charged off or canceled during the same time period. The industry with the highest default rate was gasoline stations with convenience stores.

SBA Loans By Industry: Highest Default Rates from 2010 to 2018

*Loan default rate is equal to the number of loans that were charged off or canceled, such as settled for less than the amount owed, divided by the number of loans discharged between 2010 and 2018. Note that this table only considers types of businesses that received at least 500 SBA loans between 2010 and 2018.

How the Top 10 SBA Loans by Industry and Default Rate Compare

With average default rates of more than 40%, gasoline stations with convenience stores and used car dealers had the most difficult time repaying their SBA loans between 2010 and 2018. The top 10 industries with the highest default rates all had default rates of more than 35%.

What the SBA Loans by Industry Data Tells Us About Who Gets Approved

Analysis of the SBA loans by industry data provides some insights into how successful different types of businesses were at receiving SBA funding as well as what industries are most successful at repaying SBA loans. While restaurants received more SBA loans than other industries, they did not receive the highest funding levels, nor were they among the most likely to repay their loans.

Some conclusions we can draw from the SBA loans by industry data are:

• More loans does not mean more funding: Full-service restaurants and limited-service restaurants by far got the largest number of SBA loans between 2010 and 2018. The amount of funding these two industries received combined is roughly the same amount that was issued to the hotel industry alone. The average loan amount for full-service restaurants was $270,148, compared to the average hotel loan amount of $1,400,732.
• High dollar funding does not mean higher repayment rates: Hotels did not make it into the top 10 in terms of the number of SBA loans. However, they did rank first in terms of the volume of funding. This may be because they can collateralize the loan with real estate. The average loan size for hotels was $1,400,732, compared to the average SBA 7(a) loan amount of $425,500.
• The industries most likely to repay are not receiving the most loans: Roughly 80% of loans going to chicken producers growing meat birds were paid back in full and on time. Despite how successful these businesses were in repaying loans, they weren’t recipients of a large number of loans or of significant funding volumes.

All of this shows that you have to look at a combination of metrics―number of SBA loans, the volume of SBA funding, and default rate―to understand how successful an industry is when it comes to SBA loans.

How to Get an SBA Loan

To get an SBA loan, you will first need to determine if you qualify for one by reviewing the eligibility requirements. If you feel you are qualified for an SBA loan, you will need to select an SBA loan provider. Once you have selected a provider, you can complete your SBA loan application. While some providers like SmartBiz have streamlined the SBA loan application process, applying is typically a time-consuming process.

To get an SBA loan, you will need to:

• Determine if you qualify: Review the SBA loan qualification requirements to see if your business is eligible for SBA loan funding. In general, you will need to have a credit score of at least 680, two years of business operations, a debt service coverage ratio of 1.25x or greater, as well as sufficient collateral and down payment.
• Find a provider: SBA loan providers can be direct lenders like banks or credit unions, or brokers that can help connect you with a lender. The right provider for you will depend on your current banking relationship, how much you’re looking to borrow, and how quickly you need funding.
• Complete the application and forms: You’ll need to complete a loan application and gather SBA loan documents pertaining to your personal and business finances and complete a number of SBA forms to submit to your lender. SBA loans for startups require additional documentation proving industry and managerial knowledge.

Finding a lender that is knowledgeable about your industry and has experience lending to other businesses like yours can help make the application process go more smoothly. For example, if you operate a self-storage facility, finding a lender experienced in self-storage loans can be beneficial.

If during this process, you find you are not qualified for an SBA loan or feel you need funds faster than an SBA loan can provide, there are alternative financing options. Online lenders offer a variety of short term business loans and lines of credit that have less restrictive qualifications and can often provide funding within a few days.

SBA Loans by Industry Frequently Asked Questions (FAQs)

A lot of information has been covered in this article about SBA loans by industry, who is getting SBA loans, what industries have the best and worst repayment rates, and what you need to apply for an SBA loan. If you have any questions about any of the information presented here, you can post them in the Fit Small Business forum.

Who qualifies for SBA loans?

Typical qualifications for an SBA loan include having a personal credit score of 680 or greater, and the ability to repay the loan (indicated by a debt service coverage ratio of 1.25x or higher). Additionally, for most SBA loans, you will need to have some form of collateral and provide a personal guarantee.

Are SBA loans personally guaranteed?

The SBA requires all business owners with an ownership interest of 20% or greater to provide personal guarantees when receiving an SBA loan. If your business defaults on the loan and its assets are inadequate to cover the remaining debt, the personal guarantee may allow the lender to make a claim against your personal assets.

Are SBA loans hard to get?

SBA loans have more stringent qualification requirements and take longer to fund than some other types of business loans. To get an SBA loan, you need a debt service coverage ratio of 1.25x or greater and a personal credit score of 680 or higher. SBA loans can take up to 90 days to fund.

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 repaying it on time. Based on SBA loan history, some businesses are more likely to get SBA loans and pay them back on time. Ultimately, who gets SBA loans depends on a specific business’s circumstances and the lender’s evaluation of its ability to repay the loan.