Two federal records, set side by side here: the five-year charge-off rate on non-cancelled SBA 7(a) loans coded as a change of ownership, whose borrowers can include firms with no employees, by sector, and the rate at which employer firms in that sector died according to the Census Bureau. Of 14,517 non-cancelled such loans approved from October 2017 through September 2020 (fiscal 2018 to 2020), 295 (2.03%) were charged off within five years. In the 13 sectors with at least 200 of these loans, the sectors where these loans charged off most were, broadly, the sectors where Census employer firms exited most: the rank correlation was 0.68. Loans and firms are different units, and the two windows overlap without matching, so this is a descriptive alignment of two rankings, not a measure of why any loan charged off.
Kamyar Shah sells fractional COO and CMO services.
A person buying a business with a government-guaranteed loan is making two bets at once: on the business, and on the sector it sits in. The Small Business Administration’s loan records show recorded charge-off dates for loans coded as a change of ownership, which this study tests against the registered five-year window. The Census Bureau’s Business Dynamics Statistics show, for the same sectors, how often employer firms exited. Neither agency publishes the two beside each other. This study does, for 13 sectors, and then reports one registered comparison: whether the sector ranking of loan charge-offs matched the sector ranking of firm deaths.
The sector table
Loans are non-cancelled SBA 7(a) records with an approval date from October 1, 2017 through September 30, 2020 (fiscal 2018 to 2020) and a business-age code of “Change of Ownership”. A loan counts as charged off within five years when SBA’s charge-off date falls on or before the fifth anniversary of approval. The firm death rate is the Census count of employer firms that exited, divided by the count of employer firms, averaged over calendar 2019 to 2023.
| Sector (NAICS) | Change-of-ownership loans | Charged off within five years | Five-year charge-off rate | Sold on the secondary market | Firms, 2023 | Firm deaths, 2023 | Mean annual firm death rate, 2019 to 2023 |
|---|---|---|---|---|---|---|---|
| Accommodation and food services (72) | 2,904 | 73 | 2.51% | 1,924 | 515,539 | 51,913 | 9.19% |
| Retail trade (44-45) | 2,739 | 45 | 1.64% | 1,664 | 579,638 | 53,419 | 8.40% |
| Other services (81) | 1,697 | 37 | 2.18% | 943 | 669,776 | 49,848 | 6.49% |
| Health care and social assistance (62) | 1,238 | 15 | 1.21% | 685 | 631,402 | 47,660 | 6.93% |
| Manufacturing (31-33) | 991 | 13 | 1.31% | 459 | 220,696 | 15,238 | 6.25% |
| Construction (23) | 957 | 21 | 2.19% | 447 | 684,600 | 64,629 | 7.94% |
| Professional, scientific and technical services (54) | 890 | 16 | 1.80% | 423 | 735,652 | 74,784 | 8.93% |
| Administrative, support and waste services (56) | 709 | 16 | 2.26% | 353 | 318,217 | 33,132 | 8.97% |
| Wholesale trade (42) | 462 | 9 | 1.95% | 209 | 246,895 | 19,304 | 7.31% |
| Transportation and warehousing (48-49) | 433 | 17 | 3.93% | 262 | 198,284 | 29,638 | 10.76% |
| Arts, entertainment and recreation (71) | 411 | 18 | 4.38% | 202 | 118,288 | 11,367 | 9.08% |
| Finance and insurance (52) | 390 | 4 | 1.03% | 255 | 214,433 | 19,573 | 7.63% |
| Real estate and rental and leasing (53) | 259 | 5 | 1.93% | 140 | 292,635 | 34,351 | 8.99% |
| Educational services (61) | 181 | 3 | 1.66% | 93 | 93,509 | 6,911 | 7.22% |
| Agriculture, forestry, fishing and hunting (11) | 109 | 1 | 0.92% | 54 | 18,186 | 1,947 | 8.55% |
| Information (51) | 108 | 2 | 1.85% | 45 | 73,823 | 8,789 | 10.15% |
| Mining (21) | 14 | 0 | 0.00% | 7 | 15,461 | 1,149 | 8.88% |
| Utilities (22) | 14 | 0 | 0.00% | 4 | 6,243 | 333 | 4.46% |
| Management of companies (55) | 11 | 0 | 0.00% | 5 | 24,211 | 801 | 3.11% |
Sources: U.S. Small Business Administration, 7(a) FOIA loan-level files as of June 30, 2026 (fiscal 2010 to 2019 and fiscal 2020 to present). U.S. Census Bureau, Business Dynamics Statistics, sector by year, retrieved October 4, 2026. The six sectors with fewer than 200 loans are shown for completeness and were excluded from the registered comparison, as fixed in advance. The sold-on-the-secondary-market column matters because the public file may not record later charge-off performance for every sold loan, so a sector’s charge-off rate may be understated, and more so where more loans were sold. No loan had a blank, non-numeric or unresolvable NAICS code, and no sector in the loan file fell outside the Census sector list.
The Census counts behind the last column, by year (firms, then firm deaths, from the Business Dynamics Statistics, with the mean annual death rate calculated as the mean of the five yearly ratios):
| Sector (NAICS) | 2019 firms / deaths | 2020 firms / deaths | 2021 firms / deaths | 2022 firms / deaths | 2023 firms / deaths | Mean annual death rate |
|---|---|---|---|---|---|---|
| Accommodation and food services (72) | 490,432 / 44,378 | 490,411 / 45,861 | 483,282 / 46,250 | 506,907 / 40,166 | 515,539 / 51,913 | 9.19% |
| Retail trade (44-45) | 576,467 / 48,089 | 566,909 / 48,596 | 569,349 / 44,967 | 578,952 / 46,234 | 579,638 / 53,419 | 8.40% |
| Other services (81) | 648,134 / 37,822 | 645,673 / 39,548 | 643,348 / 42,973 | 661,224 / 42,225 | 669,776 / 49,848 | 6.49% |
| Health care and social assistance (62) | 605,131 / 39,080 | 607,026 / 40,145 | 613,429 / 41,844 | 622,847 / 44,808 | 631,402 / 47,660 | 6.93% |
| Manufacturing (31-33) | 227,441 / 13,624 | 223,420 / 14,048 | 219,978 / 13,362 | 222,723 / 13,336 | 220,696 / 15,238 | 6.25% |
| Construction (23) | 626,375 / 46,117 | 632,564 / 48,471 | 650,123 / 46,412 | 671,732 / 54,449 | 684,600 / 64,629 | 7.94% |
| Professional, scientific and technical services (54) | 692,385 / 57,354 | 699,837 / 57,375 | 715,125 / 59,636 | 726,660 / 70,196 | 735,652 / 74,784 | 8.93% |
| Administrative, support and waste services (56) | 297,214 / 24,246 | 298,650 / 25,280 | 303,712 / 26,115 | 313,868 / 28,855 | 318,217 / 33,132 | 8.97% |
| Wholesale trade (42) | 260,228 / 18,902 | 253,601 / 18,844 | 250,432 / 17,524 | 250,937 / 17,684 | 246,895 / 19,304 | 7.31% |
| Transportation and warehousing (48-49) | 167,813 / 15,616 | 169,010 / 17,657 | 181,172 / 16,309 | 198,013 / 20,000 | 198,284 / 29,638 | 10.76% |
| Arts, entertainment and recreation (71) | 107,060 / 8,546 | 109,205 / 9,285 | 106,838 / 11,473 | 114,822 / 9,809 | 118,288 / 11,367 | 9.08% |
| Finance and insurance (52) | 211,654 / 15,287 | 212,151 / 14,628 | 215,375 / 14,778 | 216,341 / 17,429 | 214,433 / 19,573 | 7.63% |
| Real estate and rental and leasing (53) | 265,107 / 20,568 | 270,524 / 21,571 | 282,340 / 22,706 | 293,394 / 27,650 | 292,635 / 34,351 | 8.99% |
| Educational services (61) | 86,174 / 5,754 | 87,510 / 5,900 | 86,858 / 7,410 | 91,118 / 6,149 | 93,509 / 6,911 | 7.22% |
| Agriculture, forestry, fishing and hunting (11) | 18,470 / 1,476 | 18,071 / 1,441 | 18,568 / 1,344 | 18,632 / 1,644 | 18,186 / 1,947 | 8.55% |
| Information (51) | 68,694 / 6,457 | 69,580 / 6,637 | 71,468 / 6,589 | 73,313 / 7,851 | 73,823 / 8,789 | 10.15% |
| Mining (21) | 16,578 / 1,335 | 15,983 / 1,527 | 14,960 / 1,561 | 15,165 / 1,351 | 15,461 / 1,149 | 8.88% |
| Utilities (22) | 5,641 / 219 | 5,691 / 224 | 5,889 / 258 | 6,077 / 289 | 6,243 / 333 | 4.46% |
| Management of companies (55) | 25,197 / 689 | 25,028 / 666 | 24,711 / 780 | 24,179 / 888 | 24,211 / 801 | 3.11% |
Across all 19 sectors the cohort was 14,517 loans and 295 charge-offs, a five-year rate of 2.03%. The loan unit is a loan, not a business, and SBA’s borrowers include firms with no employees. The Census unit is an employer firm. A charge-off is SBA’s accounting event, defined in its data dictionary as “Date SBA charged off loan (if applicable)” for the date, and a firm death is Census’s “Number of firms that exited during the last 12 months”. The two populations overlap without being the same population, and the article never divides one by the other.
The registered comparison
The study fixed one comparison before any loan was counted: a rank correlation across eligible sectors between the five-year charge-off rate and the mean annual firm death rate. Eligible meant at least 200 change-of-ownership loans and complete Census figures for every year from 2019 to 2023. Thirteen sectors qualified.
The descriptive, ecological Spearman rank correlation was 0.68 across those 13 sectors, comparing five-year charge-off rates for SBA change-of-ownership loans, whose borrowers can include firms with no employees, with Census death rates for employer firms. In words: the sectors whose acquisition loans charged off most often were, broadly, the sectors where employer firms exited most often. Transportation and warehousing had the second-highest charge-off rate (3.93%) and the highest firm death rate (10.76%) among eligible sectors. Finance and insurance had the lowest charge-off rate (1.03%), while manufacturing had the lowest firm death rate (6.25%). Health care and social assistance had the second-lowest charge-off rate (1.21%) and the third-lowest firm death rate (6.93%). Arts, entertainment and recreation had the highest charge-off rate of all (4.38%) and the third-highest firm death rate (9.08%) among eligible sectors.
This is a descriptive, ecological result. Thirteen points support a ranking, not an inference, and no probability value is attached. The loans’ five-year windows run from late 2017 to late 2025, while the Census years are 2019 to 2023, so the two measures overlap in time without matching exposure. Nothing here says whether a charge-off happened because of the sector, the deal, the buyer, the lender or the year.
What is in the loan count, and what was set aside
The cohort started from 15,938 change-of-ownership loans approved in the window, after applying the registered rule that BusinessAge had to be exactly “Change of Ownership”. In the same approval window, 1,220 records had a blank BusinessAge value and 21,889 were coded “Unanswered”, so they were outside the cohort by construction. Cancelled loans (1,421) were removed. No record in any sector was inconsistent under the registered rules (a charge-off date before approval, an invalid date, or a charged-off status with no date), so the inconsistent count was 0 and the inconsistent share was 0.0%. No loan was excluded because its fifth anniversary fell after the June 30, 2026 as-of date: the count was 0. One undisbursed loan with status “COMMIT” stayed in the cohort under the registered definition.
Free 20-Minute Operations Review
Dealing with a specific operational bottleneck? Kamyar Shah works with founders and CEOs to identify the root cause and build a fix.
A further 262 loans carry a charge-off date after their fifth anniversary. Under the registered endpoint they count as not charged off within five years, because they had not been. Over the whole fiscal 2018 to 2020 cohort, then, 557 loans show a charge-off status in the June 30, 2026 file, of which 295 fall inside the five-year window.
Of the 14,517 loans, 8,174 (56.3%) carry SBA’s indicator for a loan sold on the secondary market, which the dictionary describes as “An indicator if the loan was sold on the secondary market.” The public file may not record later charge-off performance for every sold loan. If unrecorded post-sale charge-offs occurred, the charge-off rates here may be understated, especially in sectors where more loans were sold. The sold count for every sector is in the sector table. Among the 13 eligible sectors, the share sold ranged from 45% in wholesale trade (209 of 462) to 66% in accommodation and food services (1,924 of 2,904).
SBA’s status “EXEMPT”, carried by 5,794 of the loans, means in the dictionary’s words “The status of loans that have been disbursed but have not been cancelled, paid in full, or charged off are exempt from disclosure under FOIA Exemption 4”. Those loans count as not charged off, because they have no charge-off date and no charge-off status.
The five-year rate here is the proportion observed in the complete eligible extract cohort, not an estimate from a probability sample. No sampling interval is shown, and the wave 1 study’s intervals for the same file are not repeated. Variation across loans that might be made in the future is not estimated.
What the numbers mean for a buyer or a seller
These are descriptive aggregates for the stated federal-data population. They do not identify causal effects, diagnose an individual company, or estimate the result of adopting a practice. The guidance that follows is operating judgment, not a finding from the data.
A charge-off rate of 2.03% over five years, with sector rates from about 1% to about 4% among the large groups, is the backdrop against which a buyer is negotiating. The sector ranking says something a buyer can use without over-reading it: broadly, in sectors where employer firms exited more often, the loans that financed a purchase also charged off more often. That is consistent with sector conditions showing up in both records, and consistent with several other explanations the data cannot separate.
For a seller, the same table supplies historical sector-level context that a buyer may consider when pricing financing risk. It does not measure any particular buyer’s risk.
How to use it: three checks before the letter of intent
The steps below are an operating recommendation. This study did not test them, and the Small Business Administration and the Census Bureau do not endorse them.
1. Price the sector, then the business. Before valuing the specific company, a buyer can read the sector’s employer-firm death rate as sector context, and treat a target whose own history appears better than that context as a claim to be verified in diligence, not accepted from the listing.
2. Do the underwriting as if no one else will. More than half of these loans were sold on the secondary market, which is normal practice and says nothing in this data about any loan’s risk. Whoever ends up holding the loan, this data does not establish who bears the legal, financial or operating consequences of a charge-off. A buyer should review those consequences with qualified legal and lending advisers, and the buyer’s own underwriting of the business has to stand on its own.
3. Separate the deal risk from the sector risk in the plan. The sectors with high charge-off rates in this table also have high employer-firm death rates, and those exits are measured across employer firms generally, not only bought firms. A buyer’s first-year operating plan in such a sector should stress-test customer, staffing and supplier assumptions, rather than treating the purchase as inheriting a stable position. Decisions about loan structure, personal guarantees and tax treatment depend on the buyer’s circumstances and applicable law, and should be reviewed with qualified legal, lending and tax advisers.
What this data does not tell you
- It does not say why any loan charged off, or that the sector caused it.
- A charge-off is a loan outcome, not the failure of the purchased business, and a firm death is an exit from the Census frame, not necessarily a failure.
- The loan unit includes businesses with no employees, while the Census unit is employer firms only.
- The five-year clock starts at approval, and loans charged off later than that are not counted here.
- Charge-off performance may be unobserved for loans sold on the secondary market.
- Thirteen sectors support a ranking, not a statistical test, and no interval or probability value is claimed.
Method
Already published by the agency: SBA publishes industry-level charge-off rates for all 7(a) loans in its portfolio performance reports, without a split by the business-age code. Census publishes firm counts and firm death counts by sector in the Business Dynamics Statistics. The wave 1 study on this site reported the all-sector five-year charge-off rate for change-of-ownership loans against existing-business loans. New here: the change-of-ownership cohort’s five-year charge-off rate by sector, set beside the Census firm death rate, and the registered rank comparison.
Sources. U.S. Small Business Administration, 7(a) FOIA loan-level files, FOIA_7a_FY2010_FY2019_asof_260630.csv and FOIA_7a_FY2020_Present_asof_260630.csv, data as of June 30, 2026. The files are public records. In SBA’s data dictionary, BusinessAge is a “Categorical description of the age of the business” and NaicsCode is the “North American Industry Classification System (NAICS) code”. U.S. Census Bureau, Business Dynamics Statistics, sector by year, variables FIRM (“Number of firms”) and FIRMDEATH_FIRMS (“Number of firms that exited during the last 12 months”), retrieved from the Census data service on October 4, 2026 and archived before the protocol was frozen.
Cohort and outcome. Approval dates were from October 1, 2017 through September 30, 2020, BusinessAge was exactly “Change of Ownership”, and cancelled loans were excluded. The fifth anniversary is the same month and day five years after approval (a February 29 approval maps to February 28). A loan is charged off within five years when its charge-off date is valid, not before approval, and not after that anniversary. Sector is the first two digits of the NAICS code, with 31 to 33, 44 to 45 and 48 to 49 combined as NAICS does. No borrower, lender or franchise brand is named.
Comparison. Spearman rank correlation across sectors with at least 200 eligible loans and complete Census figures for 2019 to 2023, between the five-year charge-off rate and the mean of the five annual firm death rates. No quotient is formed between loan events and firm events.
Protocol. The cohort, outcome, exclusions, eligibility threshold and comparison were frozen in a dated protocol on October 4, 2026, after the source files and responses had been archived with hashes and before the registered comparison was computed. Before freezing, the SBA file’s field list and the Census API’s structure had been inspected, and some national Census rows had been seen. No loan had been counted. The protocol (wave 3 section) and its dated amendments are at https://kamyarshah.com/public-data-protocol/
Check. A second program, written separately from the registered definitions by a different author from the analysis code and run against the raw files without access to this study’s code or results, recomputed all 13 claim groups, including every row of the sector tables. Every figure in the tables and text was compared and matched. The programs, archived inputs, manifests and hashes are kept with the protocol record.
The agencies did not review or endorse this analysis. Kamyar Shah sells fractional COO and CMO services.
Questions about this analysis can be sent through https://kamyarshah.com/contact/.
