What is the SBA

The U.S. Small Business Administration, commonly referred to as the SBA, is the only cabinet-level federal agency fully dedicated to supporting small businesses and entrepreneurs from counseling to capital. Many small businesses turn to the SBA for loans, as SBA loans typically have lower rates and longer durations compared to other traditional bank loans.

SBA 7(a) Loan Program

The SBA’s most popular loan program is the 7(a) loan for small businesses. The 7(a) loan provides financial assistance for entrepreneurs starting a new business or acquiring, operating, or expanding an existing business. The loans must be approved by the SBA.

SBA Data Analysis

Fiscal Year 1991-2019 7(a)

Vetted Biz has reviewed and analyzed the SBA 7(a) loan approvals from the fiscal years 1991-1999, 2000-2009 and 2010-2019. The records were obtained through SBA’s official website.

Over 1,575,141 small businesses in the U.S. were approved for the SBA 7(a) loan from 1991 to 2019. These businesses are categorized by the North American Industry Classification System, NAICS. In total, there were 1,221 NAICS classifications.

SBA Franchise Indentifier Code Study 

Of the 1,575,141 businesses approved for a 7(a) loan, over 108,000 of these businesses were franchise concepts representing roughly 7% of approved loans. There were 506 NAICS classifications for businesses that were franchises and many of the NAICS categories did not accurately reflect the nature of the franchise business. Also, many of the franchises had different NAICS classifications for each individual loan. Therefore, Vetted Biz recategorized the franchises by 14 industries that more accurately reflect the business nature of the franchise. Listed you can find how many loans were approved for each industry.

Franchise Industries receiving SBA 7(a) Loan Approval from 1991-2019

total loans

Franchise Industries SBA 7(a) Loan Approval from 1991-2019

Adjusted Total Loans (%)

Total Loan Franchise Industry SBA

Adjusted Total SBA 7(a) loans for franchises and industries from 1991-2019 excluding loans not disbursed (Cancelled and Commit Loan Status)

Adjusted Paid In Full Rate (%)

SBA Paid in Full Rate

SBA Default Rate by Franchise Industry

Further analysis was conducted by franchise industry of SBA loans for franchises based on the loan status. The following loan status categories are listed below. Please note the most important loan statuses to understand in this analysis are ‘Paid In Full’ and ‘Charged Off.’

SBA Loan Statuses

  • Paid in Full: Loan has been repaid if full including all principal and interest payments
  • Charged Off: Loan no longer has reasonable expectation of further payment after default
    • Defaulted: Loan payment has been overdue for over 90 days
  • Commit: Loan undisbursed, also labelled as Not Funded
  • Cancelled: Loan is cancelled by borrower or occasionally by SBA if description does not follow terms of use
  • Exempt: Loan is exempt from disclosure under FOIA Exemption 4, which protects “trade secrets and commercial or financial information obtained from a person privileged or confidential.” Exempt loans also include outstanding loans. 

The best loan status reflecting financial health of the franchise is Paid in Full, as the business has already paid off the loans and all interest. In contract, the worst loan status is Charged Off, as the loan has defaulted and further collection of debt is doubtful. The SBA recognizes this as a loss and removes the account from its active accounts receivable.

Vetted Biz reviewed the 108,000+ franchises that were approved for the SBA 7(a) loan from 1991-2019. Of the businesses that were not exempt, most franchises had a Paid in Full loan status, while only 12% of franchises were Charged Off. This breakdown demonstrates the overall strength of franchises’ operation despite economic downturns.

SBA Loan Status per Industry

Vetted Biz reclassified the 500+ NAICS industries into 14 industries for the franchises studied. Within each industry, we studied the rate of the two most important loan statuses, Paid in Full and Charged Off Rate. Below you can find the adjusted results of both for each industry with a further breakdown of how many businesses in those industries had that loan status. Adjusted results exclude loans that were “Committed” or “Cancelled” due to the fact that these loans ended before they were ever disbursed by the lender.  

From 1991 to 2019, SBA loans for franchises with the 7(a) loan in the Travel and Hospitality industry had the highest Paid in Full rate and lowest Charged Off rate. Although many prospective franchisees first explore franchise opportunities in the Food and Beverage space, it is advisable to also explore other industries like Travel and Hospitality and see how they are growing. The Travel and Hospitality industry is largely dominated by hotels and motels.

Some industries can have a wider gap between businesses that are doing well and those that are not. In other words, more risk can lead to more reward. For example, the Business Services industry has one of the highest Paid in Full rates, but it also has one of the highest Charged Off Rates. On the other hand, industries that have lower Paid in Full rates like Fitness Centers and Home Services also have lower Charged Off rates. In fact, in the Real Estate industry, only one business had a Charged Off Loan Status.

When prospective franchisees are exploring what is the best franchise for them to invest in, it is also important to understand the industry a franchise is in. Reviewing the SBA 7(a) loans is just one of many different factors to consider when analyzing the success of franchise industries.

Paid in Full : Charged Off Ratios

From 1991 to 2019, SBA franchise loans in the Travel and Hospitality industry had the highest Paid in Full to Charged Off ratio, where for every 9 and a half franchises that paid their loans off in full, one charged off on their loans. Similarly, the healthcare services industry which encompasses urgent care centers or at-home hospice services also had a relatively high ration where for every 7 franchises that paid their loans off in full, one charged off on their loans.

Beyond the travel and hospitality; and healthcare services industries most industries had a Paid in Full to Charged Off Ratio of around 4 and half to 5 franchises that paid in full, to one that then charged off on their loans. Additionally, the Education Programs and Other Businesses industries had the lowest ratio, were for approximately every 2 franchises that paid their loans off in full, 1 other eventually charged off on their loans.

When prospective franchises are studying the best industries to invest in, beyond looking at separate numbers and loan statuses in general, it is important to understand how the industry functions as a whole. That said, the Paid in Full to Charged Off ratio allows for an extensive insight into how industries and their SBA loans in general are doing that are helpful in guiding the franchisee on the best franchises to consider investing in. 

Limitations and Future Research

Of these franchise businesses, 26% had an exempt loan status. Therefore, most of these businesses were not able to disclose whether they had Paid in Full, Cancelled, or Charged Off. Although additional information on what a loan’s exempt status encompasses can be found on a separate page, this nevertheless limits an accurate analysis of SBA franchises’ success overall. 

In the FOIA 7(a) Report, most businesses from the same franchise were labelled with many different NAICS classifications. For example, Subway, the franchise with the most units in the U.S., had four different NAICS classifications. Vetted Biz cleaned the data for this report to ensure the same franchise is categorized in the same industry.

Furthermore, some industries like Real Estate and Cleaning and Maintenance only had a few hundred businesses with loan approvals compared to most industries that had a few thousand. Therefore, one or two businesses in smaller industries that had a Charged Off loan status would drastically affect the Charged Off Rate. Additionally, the “Other Businesses” industry is for business concepts that do not fall in one of the other 13 general categories and do not share similar subcategories. This includes franchise business like trucking companies and dry cleaning services.


Adjusted Paid in Full Rate

PIF Rate

Adjusted Charged Off Rate (%)

SBA Charged Off Rate

Paid in Full to Charged Off Ratios

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