PeerSense Data Study
SBA Lending Risk by Industry: the Safest and Riskiest Sectors
PeerSense analyzed 379,703 fully seasoned SBA loans, worth $137.7 billion in approved capital, to measure how often loans in each industry end in default. The headline is the split inside hospitality: hotels and motels defaulted at 3.53%, one of the lowest rates of any sector, while restaurants and bars defaulted at 9.34%, roughly 2.6 times higher. Dentist and veterinary practices are the safest borrowers on record. The full ranking is below.
Cohort: SBA 7(a) and 504 loans approved fiscal years 2010 through 2017, every loan now seasoned nine or more years. Default measured as charge off among loans with a disclosed terminal outcome. Data as of July 2026.
Five findings from the data
1. Hospitality is two different risks wearing one label.
Hotels and motels defaulted at 3.53% (7,331 loans), putting lodging among the safest sectors in the entire book. Restaurants and bars defaulted at 9.34% (40,735 loans). A restaurant loan was about 2.6 times more likely to end in default than a hotel loan, even though both sit under the same industry heading.
2. The safest borrowers are health and professional practices.
Dentists (2.75%), veterinarians (2.37%), optometrists (2.91%) and investment advisors (1.83%) anchor the safe end. A dental practice defaulted at roughly a third of the 7.18% cohort average, across 7,775 loans.
3. Discretionary retail, restaurants and gyms carry the most risk.
Residential remodelers (10.77%), sporting goods stores (10.66%), fitness centers (10.02%) and limited service restaurants (9.46%, 13,166 loans) top the risk table. The gap from safest to riskiest industry is close to sixfold, a spread lenders price into every quote.
4. A franchise brand did not lower default risk.
Loans to franchised businesses defaulted at 8.9% (30,308 loans) versus 7.03% for independent businesses (349,395 loans). The brand name on the door did not translate into a lower failure rate on the loan; industry and structure mattered more. Part of the gap is mix, since franchise loans skew toward food service, which carries above average risk on its own. The effect persists but narrows when you hold industry constant: inside food service alone (NAICS 722), franchised loans defaulted at 10.15% versus 9.07% for independents.
5. Manufacturing beat the average.
SBA manufacturing loans defaulted at 6.37% (32,893 loans), below the 7.18% book wide rate. The asset base and longer customer relationships in manufacturing show up as steadier repayment.
Safest industries for SBA borrowers
Lowest default rates. Minimum 1,500 resolved loans per industry.
| # | Industry (NAICS description) | Default rate | Loans analyzed |
|---|---|---|---|
| 1 | Investment Advice | 1.83% | 1,529 |
| 2 | Veterinary Services | 2.37% | 3,246 |
| 3 | Offices of Dentists | 2.75% | 7,775 |
| 4 | Offices of Optometrists | 2.91% | 1,513 |
| 5 | Hotels (except Casino Hotels) and Motels | 3.46% | 6,366 |
| 6 | Poultry Farming (Broilers and Other Meat Type) | 3.92% | 2,448 |
| 7 | Insurance Agencies and Brokerages | 4.03% | 3,174 |
| 8 | Engineering Services | 4.16% | 2,453 |
| 9 | Offices of Physical, Occupational and Speech Therapists | 4.23% | 1,960 |
| 10 | Gasoline Stations with Convenience Stores | 4.26% | 4,320 |
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Highest risk industries for SBA borrowers
Highest default rates. Minimum 1,500 resolved loans per industry.
| # | Industry (NAICS description) | Default rate | Loans analyzed |
|---|---|---|---|
| 1 | Residential Remodelers | 10.77% | 4,475 |
| 2 | Sporting Goods Stores | 10.66% | 2,092 |
| 3 | Supermarkets and Other Grocery (except Convenience) Stores | 10.59% | 2,710 |
| 4 | Drycleaning and Laundry Services (except Coin-Operated) | 10.16% | 1,771 |
| 5 | Fitness and Recreational Sports Centers | 10.02% | 5,038 |
| 6 | Snack and Nonalcoholic Beverage Bars | 9.85% | 2,843 |
| 7 | New Single-Family Housing Construction | 9.53% | 2,047 |
| 8 | Other Personal Care Services | 9.51% | 2,239 |
| 9 | Janitorial Services | 9.47% | 1,880 |
| 10 | Limited-Service Restaurants | 9.46% | 13,166 |
A higher industry default rate does not mean strong operators cannot get funded. It means the lender match matters more. Experienced borrowers with real equity and healthy cash flow still win competitive terms in every industry on this list, because the right lender underwrites the operator, not just the sector.
Inside hospitality: the roof is safe, the plate is risky
Lodging is a real estate backed asset with a deeded property behind the loan. A restaurant is largely a lease, equipment and goodwill. When lenders and journalists talk about hospitality risk as one number, they miss that the collateral behind a hotel loan and a restaurant loan could not be more different. That difference is worth almost 2.6 times the default risk.
Methodology
Source. Loan level SBA 7(a) and 504 records, the same public disbursement data the SBA releases, loaded into the PeerSense data warehouse (2,125,909 total loan records spanning fiscal years 1992 through 2026).
Seasoned cohort. We restricted the study to loans approved in fiscal years 2010 through 2017 (approval dates October 2009 through September 2017). Every loan in the cohort has now had nine or more years to perform. Because SBA charge offs overwhelmingly surface within the first several years, this window is old enough that fresh loans are not miscounted as survivors. We deliberately excluded loans approved after 2018, where a large share still have their outcome withheld and too few have resolved.
Definition of default. Default rate equals loans charged off divided by resolved loans, where a resolved loan is one with a disclosed terminal outcome: paid in full or charged off. Loans that were cancelled, not funded, still open, or carried an outcome the SBA withholds were excluded from both the numerator and the denominator. This yields 379,703 resolved loans, 27,256 of them charged off, for a 7.18% cohort average.
Sample floors. Industry rankings use NAICS descriptions and report only industries with at least 1,500 resolved loans, so no ranking rests on a thin sample. Sector and segment figures use larger groupings. Loan counts are shown next to every rate so any figure can be checked.
NAICS note. Industries are grouped by NAICS description so that codes split or renamed in the 2017 NAICS revision are counted as one industry, standard practice for consistency over time. For example, Limited Service Restaurants combines codes 722513 and 722211, and Full Service Restaurants combines 722110 and 722511.
Attribution. This study is free to cite and republish with attribution to PeerSense under a Creative Commons BY 4.0 license. The underlying industry table is available on request. Journalists and analysts can reach us at (317) 452-6990.
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Source: PeerSense analysis of 379,703 seasoned SBA loans, https://peersense.com/research/sba-loan-default-study-2026
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A PeerSense analysis of 379,703 fully seasoned SBA loans found that hotels and motels default at 3.53 percent while restaurants and bars default at 9.34 percent, roughly 2.6 times higher (PeerSense, SBA Lending Risk by Industry, 2026).
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Source: <a href="https://peersense.com/research/sba-loan-default-study-2026">PeerSense analysis of 379,703 seasoned SBA loans</a> (2026).
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PeerSense. (2026). SBA Lending Risk by Industry: the Safest and Riskiest Sectors. Retrieved from https://peersense.com/research/sba-loan-default-study-2026
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Hotels default 2.6x less than restaurants on SBA loans.3.53% vs 9.34% across 379,703 seasoned SBA loans.Source: PeerSense →
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<blockquote style="max-width:420px;margin:1rem 0;padding:16px 20px;border-left:4px solid #b5893a;background:#f8fafc;font-family:system-ui,sans-serif;"><strong style="display:block;font-size:16px;color:#0f172a;">Hotels default 2.6x less than restaurants on SBA loans.</strong><span style="display:block;margin-top:4px;font-size:14px;color:#475569;">3.53% vs 9.34% across 379,703 seasoned SBA loans.</span><a href="https://peersense.com/research/sba-loan-default-study-2026" style="display:inline-block;margin-top:8px;font-size:13px;color:#b5893a;text-decoration:none;">Source: PeerSense →</a></blockquote>
Why PeerSense runs this data
PeerSense is a capital advisory and lender network, not a lender. We keep loan level outcome data on the whole SBA market and on our funding network so we can match a borrower to the lender most likely to fund their specific deal, in their specific industry, at competitive terms. The same intelligence behind this study runs behind every match we make. Explore the full industry data library, read the State of SBA Lending report, or see the full industry default ranking.