October 31, 2014

What Do Small Business Administration (SBA) Loans Look Like?

sba loans data

Hidden among the large amount of data released regularly by the Federal Reserve is some valuable information about the terms of Small Business Administration (SBA) guaranteed loans.

I found the numbers intriguing because they show that the average SBA-guaranteed loan is smaller, of shorter “maturity/repricing interval,” and carries a lower interest rate than I would have otherwise thought.

The data come from the “Survey of Terms of Business Lending,” a quarterly questionnaire administered by Federal Reserve Board of Governors to 398 domestic and foreign banks operating in the United States. It asks lenders about the loans they made during the first complete week in the middle month of each quarter.

The survey, in general, is a key source of information about terms of loans made to businesses. In 2012, the data releases began to break out separately information about loans guaranteed by the Small Business Administration (SBA), which is what provides the new insights into the government-guaranteed loans.

Because the survey asks banks about loans made during a particular week, the responses jump around a bit. To provide a smoother picture of SBA-guaranteed loans, I have averaged the data reported by the Fed for the last four surveys.

Here’s what the numbers show:

  • The average SBA-guaranteed loan amount was $276,000.
  • The “weighted-average maturity/ repricing interval” was 172 days.
  • The average annual interest rate on the loans was 3.91 percent.
  • 42.6 percent of the loans were prime-based.
  • 43.5 percent of the loans were subject to pre-payment penalties.
  • 68.2 percent of the loans were secured by collateral.
  • The average loan was slightly more than “moderate risk,” averaging 3.22 on a scale where “3” means “moderate risk” and “4” means “acceptable risk.”

Knowing this information is useful if you are looking for an SBA-guaranteed loan or are seeking to understand what’s happening to the guaranteed loan market. However, you would not want to use it to draw inference about the small business credit market in general.

SBA-guaranteed loans don’t make up a very big fraction of commercial and industrial loans in the United States. The Fed data shows that the average value of SBA-guaranteed loans made during each of the last four survey periods was $973 million.

This works out to 1.1 percent of $84.8 billion in commercial and industrial loans made in the average survey period. And 6.6 percent of the $14.8 billion in small (less than $1 million) commercial and industrial loans to business.

Loan Photo via Shutterstock

15 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

15 Reactions

  1. There is no doubt about the service rendered by SBA in providing timely loans to the needy with a very low rate of interest. But there are many such pvt. financial institutes operating to help people to come out of distress, i believe more such initiatives come into the arena to reverse the recession effect.

  2. Thanks for this important data, Scott.

    The average interest rate for an SBA loan was lower that I thought.

    Another great reason to try to work with SBA-Approved lenders.

    I hope 2014 is better….that more banks will start loaning money again.

    The Franchise King®

  3. Knowing this information is useful if one is looking for an SBA-guaranteed loan or is seeking to know what’s happening to the guaranteed loan market in the US.

  4. Interesting study. It is quite interesting to see the amount that they are lending. It seems that they are only lending an amount that they can easily pay. I guess most small business owners are being more careful in taking loans.

  5. Scott, as a career SBA lender, I have to express skepticism at either some of the data or your interpretation. For one, the average term (172 days) makes no sense. Did you mean months? One of the key features of guaranteed lending is that borrowers can amortize their debt closer to the useful life of the underlying assets, meaning 25 yrs. for RE & 10 yrs. for equipment.

    The average interest rate also looks suspect. Most loans ($ wise) are 7(a) Prime-based loans, suggesting that they would range within limits from 4.25%-6%. 504 loans, accounting for about 1/3 of SBA lending, do tend to be lower priced, fixed rate loans – but they tend to be in the 4%+ range.

    Finally, re collateral, the 68% must reflect the #loans rather than $ volume. This figure was probably skewed by the smaller Express/SLA loans that are under $150k. Larger 7(a) and 504 loans are always secured with collateral.

  6. Charles,
    I am not how to respond to your comment. All I did in this post was to report the numbers from the Federal Reserve’s “Survey of Terms of Business Lending” available here:

    http://www.federalreserve.gov/releases/e2/Current/default.htm#fn2

    The Fed says that this survey collects “unique information concerning price and certain nonprice terms of loans made to businesses and farmers during the first full business week of the mid-month of each quarter (February, May, August, and November).”

    I just reported the numbers under the section titled “Commercial and Industrial Loans Backed by the SBA”, which the footnote says are “Loans guaranteed, either in part or in whole, by the Small Business Association (SBA).” The only thing I did with the data was to average the numbers for the last four surveys to take out some of the differences between the four quarters.

    You made specific points about three of the numbers.

    You said that the “average maturity” number looks too short and can’t be measured in days. This number is probably the post easily explained. The maturity is measured in days. The Fed measures the “average maturity/repricing interval (days).” The footnote suggests why the maturity looks short. They say, “the ‘maturity/repricing’ interval measures the period from the date the loan is made until it first may be repriced or matures. For floating-rate loans that are subject to repricing at any time–such as many prime-based loans–the maturity/repricing interval is zero. “ I suspect that the floating rate loans are what is shortening this measure of maturity.

    You said that the loan rate looks low. The Fed measures the “weighted average effective loan rate (percent).” The footnote says that the “effective (compounded) annual interest rates are calculated from the state rate and other terms of the loans and weighted by loan amount.” Here I am not sure why the average rate is lower than what you would expect. The only thing I can think of is that your perceptions reflect the type of place where you are a lender. The data show a sizable difference between large and small banks, for instance.

    Finally, you say that the collateral number “must reflect the #loans rather than $ volume”. No, the Fed survey says “percent of the value of loans…secured by collateral.” Again, there is a big difference between large and small banks so perhaps your perceptions again reflect the type of place where you are a lender.

  7. The column is actually “Weighted-average maturity/ repricing interval (days)”.
    The 172 days would be the average repricing interval for SBA loans. The average original maturity for an SBA 7(a) loan is about 13 years, and longer for 504 loans.

  8. I have updated the post to use the phrase “maturity/repricing interval” in place of “maturity” to make the information clearer.

  9. Here’s a few stats about the SBA that are probably even more important, that show the SBA very rarely lends to small businesses (all confirmed to me personally by the SBA this month):

    1) In 2007, the average loan was $180,000 and loans under $100,000 comprised 24% of all SBA loans. Today, the average SBA loan is $485,000 and loans under $100,000 are 9% and declining.

    This is important because true small businesses with 1-19 employees (98% of all businesses in America), need loans from $50,000-$200,000, with $75-$100k being the sweet spot. The SBA backs almost no loans of this size anymore.

    2) The SBA has set aside $4 billion in the SBIC program, which can only be accessed by venture capitalists. When they lend someone $1, they get to add $1-$2 from the SBIC program to that loan. NONE OF THAT $4 billion is available to small businesses, only directly to venture capitalists, who never invest in true small businesses. Does it make sense for the “Small” Business Administration to parse of $4 billion out of their budget for venture capitalists who are only interested in building giant corporations, and make it inaccessible to the 98%?

    How did we get here?

    1) In the last five years the SBA has proactively and aggressively increased the definition of “small”, allowing tens of thousands of very large businesses (500-1,500 employees, $30+ million) to be reclassified as “small”. This allowed the SBA and the banks to make fewer, bigger loans, to much larger businesses and still blow their horns and say “look how much we help small business.”

    2) Venture capitalists have taken over the SBA and wine and dine regularly with the administration. Startup America is among the most insidious with their CEO Scott Case making regularly disparaging comments about small business, and working hard to get the SBA to give him and his vcs the $4 billion. Now we have a venture capitalist coming in as the new head of the SBA.

    None of the stats in this article matter to the 98%, or to our weak economic recovery, which always rises and falls on small business. Only the fact that the 98% can no longer get loans from the SBA matters. People wonder why we have had a weak recovery – it is because small business can’t get loans and more importantly, don’t have the credit lines they used to have with which to run the daily operations of their businesses.

    Don’t believe the banks or the SBA when they show how much money they have loaned to “small” businesses. The SBA is not the SBA anymore – it is focused on businesses with 100-500+ employees – the elite 2% of all businesses who don’t need the help, but who are getting it to the detriment of the 98%.

  10. I need vhelp to get sba loan for my trucking business

  11. we need loan for our our fish farm us $25000 can you help me

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