Electricians are in high demand. Their acquisition loans tell another story.

The outlook for electricians is exceptionally strong. The Bureau of Labor Statistics projects employment in the trade will grow 9% from 2025 to 2035, more than two and a half times the 3.5% projected for all jobs. Aging infrastructure, data centers and electrification are creating demand for skilled electrical work.

For acquisition entrepreneurs, the appeal is clear: essential services, skilled labor, licensing barriers, and a market with years of expected demand.

But a growing market does not necessarily translate into a financially resilient acquisition. SBA lending data shows a different picture of what happens when these businesses change hands, and when these loans defaulted, borrowers often still owed most of what they had borrowed.

From FY2023 through FY2025, SBA loans used to acquire electrical contracting businesses entered default at an average annual rate of 5.02%, against 2.62% for SBA acquisition loans overall. Nearly twice the rate.

Figure 1

Annual default rate: electrical-contractor acquisition loans against all SBA acquisition loans

Share of acquisition loans outstanding at the start of each fiscal year that entered default during it. FY2026 is October 2025 to April 2026, annualized.

Electrical-contractor acquisitionsAll SBA 7(a) acquisitions

1. Electrical-contractor acquisition defaults climbed from 1% to 5%

Electrical-contractor acquisitions weren’t always an outlier. From FY2019 through FY2022, they entered default at 1.03% a year, close to the 1.18% for all acquisition loans.

The earlier period recorded only three defaults, so that historical estimate is sensitive to individual loans. The later period recorded 24. The rise was not a straight line: defaults peaked in FY2024, when 12 of 156 loans entered default, and eased in FY2025 before rising again in the first months of FY2026.

Defaults were increasing across SBA lending generally, but electrical-contractor acquisitions deteriorated more than the broader acquisition market.

FY2026 covers only October through April, when seven more of 211 loans entered default, and the gap with all acquisition loans has narrowed. It does not establish that electrical-contractor acquisitions will keep underperforming by the same margin. But the broader pattern is notable: an industry with strong long-term demand experienced a substantial deterioration in the credit performance of businesses changing hands.

2. The defaults weren’t isolated to one lender or a handful of small businesses

Across FY2023 through April 2026, 31 electrical-contractor acquisition loans entered default. Those defaults came from 23 lenders, none with more than four, across 15 states and several origination years. The pattern was not limited to a single financing institution or regional market.

There were also notable differences in the characteristics of the loans entering default. Larger acquisition loans featured disproportionately: loans of $2 million or more represented about 23% of electrical-contractor acquisition-loan exposure but accounted for 39% of recorded defaults. Businesses reporting at least 20 employees showed a similar pattern, 28% of exposure but 39% of defaults.

Figure 2

Where the 31 defaults were concentrated

Electrical-contractor acquisition loans, FY2023 to April 2026: share of exposure against share of the 31 defaults. The two groups overlap.

Share of exposureShare of the 31 defaults

The sample is limited, and neither loan size nor business size should be read as an independent cause of default. Still, the distribution challenges the assumption that distress in this industry was confined to the smallest or least-established businesses.

3. Defaults emerged nearly three years after closing, with most principal still outstanding

Loan performance becomes especially consequential when viewed alongside the remaining debt. Among the 31 electrical-contractor acquisition loans entering default from FY2023 through April 2026, the median time from first disbursement to default was 33 months, and the median loan still owed 88% of its original principal when it entered liquidation. Across the 2,277 SBA acquisition loans that entered default over the same period, the medians were about 40 months and 85% owed: electrical defaults came about seven months sooner, with a similar share still owed.

Figure 3

What remained at default, and what followed

The 31 electrical-contractor acquisition loans that entered default, FY2023 to April 2026; status as of SBA’s July 2026 loan records

As of SBA’s July 2026 loan records, 22 of the 31 loans remained in liquidation, four had been charged off, three had returned to current status, and two had been paid in full. SBA had purchased its lender guarantee on 19 of the loans.

These distinctions matter. Entry into liquidation does not necessarily mean a business has permanently closed, and an SBA guarantee purchase is not the same as a final realized loss. Nevertheless, the remaining balances show the potential severity of a default.

SBA acquisition loans commonly involve personal guarantees. When a borrower defaults, recovery from business assets may not eliminate the guarantor’s remaining personal obligation. The combination of a default several years after closing and substantial unpaid principal can create financial consequences that extend well beyond the operating business.

4. What might explain the deterioration?

The SBA loan records establish the change in default performance, but they do not reveal the operating conditions that caused individual borrowers to struggle. Several characteristics of electrical contracting are nevertheless worth considering.

1. Not all service revenue is recurring.

   According to ELECTRICAL CONTRACTOR magazine’s 2026 industry survey, maintenance, service and repair represented 39.7% of respondents’ revenue. But just 9.1% of total revenue came from maintenance and service contracts. That distinction matters for credit risk. Repeat service customers can generate dependable demand without the contractual revenue visibility of ongoing maintenance agreements, and the same industry classification can include businesses with very different revenue characteristics.

2. Project-based work creates working-capital exposure.

   Electrical contractors involved in commercial construction may fund labor, materials and subcontractors before collecting progress payments. Retainage, delayed change orders and project overruns can create pressure even when reported revenue and earnings remain healthy. For a leveraged acquisition, the timing of cash collections matters alongside profitability.

3. Labor and licensing create operational dependencies.

   In the 2026 industry survey, 56% of respondents reported difficulty finding trained workers; among businesses with more than 10 employees, 73% did. Electrical contracting businesses can also depend on qualified supervisors, estimators and licensed personnel. Licensing requirements vary by state, and certain ownership or qualifying-personnel changes can affect a company’s ability to operate: in California, a contractor has 90 days to replace a qualifying individual who leaves, or the license is suspended.

4. Financing conditions may have amplified pressure.

   Of the 31 loans entering default, 29 carried variable interest rates, against about 81% of acquisition-loan exposure. Variable-rate loans default more often across SBA acquisitions generally, so that share is roughly what the loan mix would predict. Still, higher borrowing costs can reduce debt-service coverage, particularly when collections or margins weaken.

None of these factors can be established from the available records as the cause of the industry’s elevated acquisition defaults. They are plausible sources of credit exposure, not demonstrated explanations.

5. The larger finding: industry demand and acquisition credit risk can diverge

Electrical contracting has a favorable long-term demand outlook. That has not changed. What the SBA data shows is that the credit performance of businesses acquired within an attractive industry can be materially different from what the industry’s growth prospects might suggest.

Electrical-contractor acquisition loans entered default at nearly twice the broader SBA acquisition rate during FY2023 through FY2025. The defaults were distributed across lenders and geographies, were not confined to small acquisition loans, and often occurred with most of the original principal still outstanding. The most recent observations suggest the relative deterioration may be moderating. Whether that continues remains to be seen.

But the broader distinction is important. Demand for an industry’s services is not the same as the financial resilience of the businesses operating within it. For electrical contractors, that gap has been visible in the SBA lending record.