Stronger Data for Stronger Decisions @ Lumos Empowering Financial Institutions to discover actionable insights through data Specializing in Small Business data
Wilmington, NC
Joined December 2021
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30 years of the credit performance:
Rolling 12-month default rate for the SBA 7(a) active portfolio.
These are among the most active sectors for SBA lending. For 2025, Healthcare/Social Assistance (62) and Transportation/Warehousing (48-49) establish the low and high default curves. The middle 7 sectors span 3.75%-5% default rate for 2025.
List of NAICS sectors in the comments.
Need an easier way to check out bank performance?
We built the Bank Key Summary Metrics dashboard for you (lumosdata.com/launch-pad).
Early default rates for small business loans have increased steadily since reaching lows in January 2022 of 0.25% and 0.13% for loan amounts <$350k and $350k–$500k, respectively.
We're looking at SBA 7(a) trends here.
Voluntary prepayment rates for small business loans in the SBA program are continued to trend downward in 2025.
Loans originated in 2020 had the highest prepayment rate in 2025 at approximately 21%. Makes sense, peak prepayment is typically in Year 5-6 of the life cycle.
Since 2023, annualized monthly default rates for loans sold into the secondary market have been significantly higher than those retained on lender balance sheets. This flips the script on the last 25 years (with a nod to 2019 for being the other flip).
Small business loans usually hit their default peak around year three or four.
Right now, the FY 2024 and 2025 originations are looking a little too ambitious at 3.9% and 1.0% for Year 2 and Year 1 performance, respectively. Those are ones to watch.
For a decade, we experienced a 2%–2.5% annual default rates in SBA supported small business lending.
Now, our short-term memory is clinging to the drunk-on-stimi lows (sub-2%) adding extra sting to the 2025 face slap.
(Please note this is the annualized not cumulative rate.)
$586 Thousand doesn’t go as far as it used to 🎈
Amazingly, we are back to the old normal. Q4’s average loan size has roughly the same purchasing power of the average loan size of the SBA 7(a) program in the 5 years preceding the pandemic stimulus roller coaster.
Approvals rebounded significantly since the June ‘25 drop-off for SBA supported loans.
This was a strong climb out of June’s minimum, especially for loans below the $500k mark. For the year, approvals less than $500k comprised 74% of the total (by loan count).
$33.4 billion in SBA loan approvals in fiscal year 2025. Excluding the pandemic-influenced spikes of 2021, this is the highest performing year.
👀 Be on the lookout for multiple posts wrapping up 2025 throughout the coming weeks.
We are sharing the performance of our small business credit performance predictions. 👇 Download the full report: lumosdata.com/resources-vide…
Actual defaults consistently fall within our model's interquartile range (IQR), showing the predictions are not only accurate but robust. The model has successfully adapted to changing economic conditions and periods of high macroeconomic uncertainty.