SBA 7(a) financing is one of the most common ways for small-businesses to access capital for growth and business expansion. As highlighted in our recent articles, these loans offer low interest rates and long repayment terms, but navigating the application process can be difficult for many potential borrowers.
In this article, we explore key performance metrics among the most common industries that receive financing through the SBA 7(a) Loan Program. All findings in this article emerge from an analysis of the top 20 performing industries that have obtained at least 3,000 loan authorizations from October 1, 2009 to December 21, 2018 according to the SBA 7(a) Loan Data Reports on SBA.gov.
Over the past nine years, more than 500,000 borrowers have benefited from the nearly $200 billion in approved loans through the program. More than 30% of the total dollar volume can be attributed to the top 20 performing industries that have received at least 3,000 loan approvals during this period. For the top five highest-volume industries, defined as number of applications submitted and approved, dentists (10,237), hotels (7,976), physicians (7,734), specialty trade contractors (7,140) and beauty salons (7,130) top the list respectively.
Top Performing Industries
To determine the top 20 performing industries among those that received at least 3,000 loans, we evaluated charge-off rate by dividing the total number of loans charged-off by the total number of loans either paid in full or charged-off during this nine-year period. Hotels (2.3%), veterinarians (2.6%), dentists (2.8%), broilers and other meats (4.2%) and insurance agencies (4.4%), ranked as the top five industries with the lowest charge-off rates. Note, this calculation does not include canceled applications that were approved, loans with an outstanding balance or loans that have not yet been recognized as charged-off. To learn more about when a charge-off can officially be justified, see when is a charge-off justified on SBA.gov.
The fastest growing industries among this group were determined by looking at the percentage of growth by number of loans from FY2010 to FY2018 for each of the 20 industries. Freight and trucking grew the fastest, up from 468 approved loans in FY2010 to 1105 in FY2018 (136% increase). Other industries that experienced rapid growth during this period include hotels (123% increase), plumbing and air-conditioning contractors (71% increase), insurance agencies (68% increase) and child day care services (60% increase).
As seen in this article, certain industries utilize SBA loans far more than others. Entrepreneurs in these fields may want to seriously consider SBA financing to fuel growth. It’s also important to keep in mind that if your industry did not rank as one of the top-performing, highest-volume industries on our list, SBA financing may still be an attractive option, as over 1,200 different industries were approved for an SBA 7(a) loan from FY2010 to FY2018.
Be on the lookout for upcoming content that will take a deeper dive on key trends and takeaways across various industries that made our list.
About Windsor Advantage, LLC
Windsor Advantage provides banks, credit unions and CDFIs with a comprehensive outsourced SBA 7(a) and USDA lending platform.
Since 2010, Windsor has processed more than $2.3 billion in government guaranteed loans and currently services a portfolio in excess of $1.3 billion (as of May 31, 2019) for over 85 lenders nationwide. With more than 150 years of cumulative SBA and USDA lending experience, cutting edge technology, rigid controls and consistent processes, Windsor is uniquely qualified to assist any size lender with implementing a thoughtful and profitable government guaranteed lending initiative.
Windsor Advantage has a team of 30 professionals with offices in Chicago, Illinois; Indianapolis, Indiana; Seattle, Washington and Charleston, South Carolina.