Interesting Facts from SBA Lending Study

From 2000 to 2008, the National Association of Government Guaranteed Lenders (NAGGL) reports that lenders made 566,437 SBA loans to small businesses, totaling almost $116 billion.

Full service and limited service restaurants received the largest portion of loans, garnering 5.1 and 3.8 percent of the borrowings, respectively.

The average size of the SBA loans was just over $204,000. However, loan size varied greatly across industries. Blood and organ banks, for instance, borrowed an average of just less than $23,000, as compared with hotels, which had an average loan size of over $860,000.

On average, the failure rate of the loans was just shy of 12 percent. However 82 industries had no loan failures between 2000 and 2008. At the other end of the spectrum, all five loans to motor home manufacturers failed.

Similar variation was present in industries with a more sizable number of loans. Several industries with more than 50 SBA loans had no loan failures between 2000 and 2008, yet shellfish fishing, which had 243 loans over the period, saw 75.7 percent of them fail.

The pattern was similar for loan charge-offs. The average amount charged off was about 2 percent. However, 82 industries had no charge-offs. Motor home manufacturers had the highest amount charged off, at 62.1 percent of the amount disbursed. And the highest charge-off rate for an industry with a more sizable number of loans was shellfish fishing which saw 28.4 percent of the amount disbursed charged off.

From the data gathered, it appears that the overall performance of SBA loans might improve significantly if historically high risk industries such as motorhome manufacturing and shellfish fishing were avoided altogether. The question is whether or not this might be the best course of action for the SBA to take in the long run. The conclusion has implications for small business owners who are applying for SBA loans as well as the US taxpayer which ultimately guarantees them.

Source: A New Way to Issue SBA Loans?

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