Research

What predicts an SBA loan charge-off?

We analyzed all 490,325 loans in the public SBA 7(a) and 504 data to ask a simple question: what actually lines up with a loan being charged off? Three patterns are clear, and one popular assumption does not hold.

By Mario Bailey · Source: SBA FOIA 7(a) and 504 data, as of 2026-03-31

How to read this. A charge-off is a loan the lender has written off as a loss. Recent loans have not finished seasoning, so the charge-off rates below understate lifetime rates; the useful signal is the relative pattern across groups, all measured the same way. These are correlations, not causes.

1. Smaller loans charge off far more often

Charge-off rates fall steadily as loan size rises, from 3.6% on loans under $50k down to 0.1% on the largest loans. Bigger loans tend to go to more established businesses with more collateral, which the data reflects.

Under $50k 3.6% · 67,770 loans

$50k to $150k 1.6% · 94,187 loans

$150k to $350k 1.0% · 116,686 loans

$350k to $1M 0.4% · 127,520 loans

$1M to $5M 0.2% · 80,402 loans

$5M and up 0.1% · 3,760 loans

2. Industry matters a lot

Charge-off rates vary widely by sector. Transportation and Warehousing loans charge off at 3.0%, about 6 times the rate of Health Care and Social Assistance (0.5%). Sectors shown have at least 2,000 loans.

Transportation and Warehousing 3.0% · 24,731 loans

Construction 1.5% · 56,798 loans

Wholesale Trade 1.4% · 23,373 loans

Administrative and Support 1.4% · 24,423 loans

Retail Trade 1.3% · 59,208 loans

Professional and Technical Services 1.2% · 45,481 loans

Information 1.2% · 4,367 loans

Real Estate 1.1% · 12,909 loans

Arts, Entertainment, Recreation 1.1% · 16,558 loans

Educational Services 1.1% · 7,498 loans

3. The interest rate barely predicts default

You might expect higher-rate loans to default more. In this data they do not: the correlation between a 7(a) loan's initial note rate and whether it charged off is about 0.005, essentially zero. Note rate alone is not a risk signal here, and what little pattern exists is confounded by loan age (the highest rates are on the newest, least-seasoned loans).

7(a) note rate	Charge-off rate	Loans
Under 5%	0.5%	26,720
5% to 7%	1.8%	88,423
7% to 9%	2.0%	58,605
9% to 11%	1.1%	116,547
11% and up	1.7%	83,591

What this means for owners

Charge-off rate is one lens on a lender's book, not a verdict on any single business. If you run a smaller or higher-risk-sector business, expect more scrutiny and lean on lenders that are active in your industry. Compare lenders by track record in the Lender Finder, and see how lending has shifted over time in Trends.

Method, sources, and disclaimer. Charge-off rate is the share of loans marked charged off, computed over the full public SBA FOIA 7(a) and 504 datasets (as of 2026-03-31); see our methodology. Loan-size and industry buckets are mutually exclusive; the rate analysis covers 7(a) loans with a recorded note rate. Recent vintages understate lifetime charge-off rates, and correlation is not causation. SBA Loan Index is not affiliated with the SBA and is not a lender, broker, or financial advisor.

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