The short version. By SBA's own loan records, self-storage was the safest industry in the 7(a) program: of 503 loans made from 2010 to 2016, 2.19% defaulted within ten years, the lowest rate of any industry with enough loans to measure. Before COVID, about one self-storage loan in 400 defaulted each year.
Since 2023 the rate has multiplied, from 0.26% a year to 1.69%, and each year has been worse than the last: at this year's pace, 4.32%, four-fifths of the whole program's rate, from a start of one-tenth. The loans failing were made in 2021 to 2023. The 2021 and 2022 loans were written at variable rates near 5% and are failing in years three to five, after their payments rose by more than half; the 2023 loans were written near 8.5% and are failing faster.
Through all of it, the loans SBA classifies as buying an existing business have barely moved: one default in 260. That is the kind of loan the reputation was built on, and it is still earning it.
The numbers
Every edition opens with the same figures: the lifetime rate that built the reputation, the annual rate before COVID, and the annual rate today, each against the whole 7(a) book. The decade average is there so you can compare this series with our Stable Industries rows.
| Self-storage | All 7(a) loans | |
|---|---|---|
| Lifetime default rate (loans made 2010–2016, followed ten years) | 2.19% | 11.59% |
| Annual default rate before COVID (FY2017–FY2019) | 0.26% | 2.53% |
| Annual default rate today (FY2023–April 2026) | 1.69% | 3.71% |
| Annual default rate, FY2025 | 2.39% | 4.22% |
| This year's pace (FY2026, October to April, annualized) | 4.32% | 5.35% |
| Annual default rate, last ten years (FY2017–FY2026) | 0.92% | 2.82% |
An annual rate is the share of outstanding loans that default in a year. A default is the day SBA's records show a loan going into liquidation, SBA buying its guarantee from the lender, or a charge-off, whichever comes first.
The finding first: loans that bought a facility are performing; loans that opened one are not
Since FY2018, SBA has recorded what stage the borrower was at when it applied: an existing business, a change of ownership, a business under two years old, or a startup whose loan would open it. The categories are SBA's classification, not a record of what the money built, but in self-storage a startup loan is, in nearly every case, a facility that did not yet exist.
The classification separates the defaults cleanly.
What the loan paid for: annual default rate, FY2023 to FY2026
Self-storage loans approved since FY2018, by the borrower's business age at application
Source: SBA 7(a) servicing data and public loan file, Ink Insurance.
Among self-storage loans approved since FY2018, those classified as startups (331 loans, median $1,275,700) have defaulted at 2.38% a year since FY2023, with 15 defaults. Businesses under two years old defaulted at 2.21%, and established businesses borrowing to expand or refinance at 2.01%.
Loans classified as a change of ownership, 260 of them with a median of $1,104,500, have produced one default: 0.20% a year, the industry's pre-COVID rate.
The gap is not an artifact of when the loans were made. Taking only loans disbursed in FY2021 to FY2023, so that every group was written into the same rates and has had the same time to fail, 13 of 141 startup loans have defaulted, 9.2%, against 1 of 130 change-of-ownership loans, 0.8%. Established and young businesses sit between, at about 7%.
The classification is a proxy, and 32 defaults is a modest base, but on the data available, a buyer's loan and a builder's loan in this industry have not carried the same risk.
The reputation was earned: the safest industry in the program
Follow every 7(a) loan disbursed from January 2010 to April 2016 for ten years, and 11.59% defaulted. Among the 503 self-storage loans, 11 did: 2.19%. The principal SBA eventually charged off came to 0.03% of every dollar lent, against 2.84% across the program.
Of the 128 industries with at least 500 loans in that window, self-storage ranks first.
The years that followed looked the same. From FY2017 to FY2019, self-storage had 440 to 594 loans outstanding at the start of each year and lost four in total: 0.26% a year, a tenth of the program's 2.53%. Even through COVID the rate stayed at half a percent or below.
Lenders read the record the way anyone would. The median self-storage loan was priced 1.50 to 1.70 points over prime in FY2019 and FY2021, against 2.25 to 2.50 for the book, and by FY2023 it was 0.50 over.
Volume followed the pricing: 255 self-storage loans in FY2021, worth $369 million, the most in any year on record and more than double FY2019.
The turn: six times the pre-COVID rate, and worse each year
Since October 2022, 46 self-storage loans have defaulted. Over that period the annual rate is 1.69%, 6.6 times the pre-COVID rate.
The pre-COVID base is four defaults, so take the multiple loosely; the most cautious reading of the same numbers is still a rise of 2.4 times, against 1.47 for the book.
The year-by-year rates matter more than the multiple: 0.26% in FY2023, 0.93% in FY2024, 2.39% in FY2025, and 4.32% at the pace of FY2026's first seven months (19 defaults among 757 loans, 2.5% in seven months, annualized).
Against the whole book, self-storage has gone from a tenth of the program's default rate to four-fifths of it in three years.
The early-warning measure agrees. Among self-storage loans not in default, 8.1% have gone three months or more without a lender-reported payment, against 6.3% across the book. On this measure the industry has already crossed the program average.
Which vintages are failing: the 2021 to 2023 loans, at two different rates
Of the 46 defaults since October 2022, 35 are loans disbursed in FY2021, FY2022 and FY2023. Nine come from loans made in FY2017 to FY2020, and two from FY2024.
The FY2021 and FY2022 loans were written cheap. Their median note rate at disbursement was 5.00%, and 81% to 90% of them were between 4% and 6%. The FY2021 loans failed late: a median of 51 months after disbursement. Only 3 of those 242 loans had failed by year three, so the standard three-year check passed the vintage, and the rest failed in years four and five.
The FY2023 loans were written after the rise, at a median of 8.50%, and failed fast. Of the 68 self-storage loans disbursed from October 2022 to April 2023 and followed for three full years, 8 have defaulted, 11.8%, slightly above the program's 10.4% for the same loans. Every self-storage vintage from FY2017 through FY2020 had a three-year rate of 0.69% or less.
Where, how large, and from whom
The deterioration is not confined to one market. The top three states, Texas, North Carolina and Missouri, hold 28% of recent self-storage loans, and the 46 defaults fall across 22 states; Texas accounts for 7 of them, in line with its share of the lending. North Carolina, the second-largest market, has had none.
The loans are large. The median self-storage loan has been about $1 million since FY2016, roughly half are $1 million or more, and between 62% and 85% of each year's loans carry a 25-year term, which means real estate is the main use.
The median defaulted self-storage loan is $1,135,000; the median defaulted 7(a) loan is $150,000.
Banks wrote 89% to 96% of self-storage loans in every year, and all but one of the recent defaults are bank loans, so the program-wide shift toward non-bank lenders is not part of this story.
The lending is concentrated in a small number of banks, and so are the defaults, in proportion; the figures here do not separate a lender's effect from the vintages and loan types it happened to write.
When SBA pays the lender, and what the borrower still owes
Self-storage loans don't fail early. Of the recent defaults, 7% came in the loan's first two years, against 29% for the book; 46% came in years three and four, and 48% after year four. The median is 39 months from disbursement.
When the loan fails: age at default, loans that defaulted FY2023 to FY2026
Share of each group's defaults (46 self-storage, 33,886 across the program)
Source: Age is months from first disbursement to default. SBA 7(a) servicing data, Ink Insurance.
Three things explain the timing. A new facility takes two to three years to lease up, so the business reaches its proving point in year three. Nearly every loan is variable-rate, 87% to 95% by year, and all 46 of the recent defaults were.
And prime rose 5.25 points in 16 months, from 3.25% in March 2022 to 8.50% in July 2023, where it stayed for 14 months.
The median loan of the FY2021 vintage was $975,000 at 5.00%, 1.75 points over prime. At prime's peak that loan carried 10.25%, and on a 25-year schedule its payment rose from $5,700 a month to $9,032, up 58%, in the same years the facility was filling. Prime has since come down and gone back up; at today's 7.00% the payment is $8,016, still 41% above the original.
The rate reset: prime, and the payment on the median FY2021 self-storage loan
$975,000 at prime + 1.75 points, 25-year schedule; disbursed about May 2021
Source: Payment arithmetic assumes a 25-year amortizing schedule. SBA 7(a) servicing data and the prime rate, Ink Insurance.
Once a loan fails, SBA moves quickly to pay the lender. It has already bought its guaranteed share on 28% of the recent self-storage defaults, a median of three weeks after the loan entered liquidation; the rest are still in process, and only 2% have reached charge-off, so the final losses aren't known yet.
SBA's payment to the lender settles the lender's claim, not the borrower's. The personal guarantee is pursued separately, by the lender and then by SBA, against whatever the collateral and other collections leave unpaid.
What is known is the starting point. On a 25-year schedule, three or four years of payments retire little principal: the median self-storage loan entering liquidation still owed 93% of its original balance, against 87% for the book. The amount outstanding at default is not necessarily the guarantor's final loss; collateral recoveries and other collections reduce the deficiency. But on a million-dollar loan, the borrower remains exposed to a potentially substantial personal obligation, and that exposure arrives in year three, not year one.
What it means for the person who signed
The personal guarantee on a self-storage loan stands behind nearly the whole loan for most of its life, and the data now says the loans themselves fail in years three to five at close to the program's rate. Three things follow if you've signed one, or are about to.
Know which kind of loan you have.
If SBA would classify it as a change of ownership, a facility with a rent roll, the record is still one default in 260 loans, and that is the good news in this report: the loan that made self-storage a safe bet is still a safe bet. If the loan opened a facility, or carried one less than two years old, you're in the group defaulting at 2.2% to 2.4% a year, on loans of $1.3 million, with most of the principal still owed.
Price the rate, not the record.
The reputation was earned at prime plus 1.5 on loans written when prime was 3.25%. A loan written at today's 7.00% prime has already absorbed most of the shock the 2021 loans took later; it's still variable, and the payment on a 25-year, $1 million loan moves about $650 a month for every point, but you're not underwriting a rate you've never seen. The FY2024 and FY2025 self-storage loans, all written after the rise, have produced no first-year defaults so far, which says little yet: in this industry the test comes in year three.
Year three is the test, so fund it in advance.
The FY2021 loans failed at a median of 51 months, after the lease-up should have been finished and after the rate had reset. A guarantor with reserves to carry the payment gap through year four is in a different position from one who planned on the pro forma.
For the buyer at the table, the finding is simpler than the headline. Self-storage hasn't stopped being a good business to own. It has stopped being a business whose loans don't fail, and the difference, as far as SBA's records can show it, is which loans: the ones that bought cash flow are performing, and the ones that bought a lease-up and a variable rate are not.
Buy the first kind, at a rate you've priced, with year three funded, and you're buying the record that made the reputation.
How we count
The figures come from SBA 7(a) data as of July 31, 2026; the 504 program, which also finances self-storage real estate, is not included. A loan counts as defaulted on the first of three dates SBA records: transfer to liquidation, SBA's purchase of its guarantee, or charge-off. Annual rates are the share of loans outstanding at the start of a fiscal year that default during it; the lifetime rate follows loans made from 2010 to 2016 for ten years; the most recent months are left out while SBA's records settle. A loan's purpose is SBA's own classification of the borrower's business age at application, recorded since FY2018. The payment arithmetic assumes a 25-year amortizing schedule at the median loan's rate and amount, and today's prime rate is the 7.00% in effect since September 17, 2026.