SBA 7(a) Charter School Feasibility Study

Smaller loans than the school class overall

The 7(a) record for charter and private schools holds 603 loans and $565.8 million from FY2017 to FY2026. Its median loan, $469,000, is the distinctive measure: it sits well below the school class median with 504 included, since 504 building loans pull that figure up, and apart from the 7(a) norm across all classes. Half the loans fall between $140,000 and $1.2 million, which mixes building purchases with working capital, equipment and leasehold improvements.

The usual caveat applies with force. The code lumps charters together with private schools, and since SBA cannot lend to nonprofits, which most charters are, this record is largely for-profit private education. Franchise share is 15.6%, the branded school systems. The Huntington National Bank leads with 49 loans and $23.4 million; well behind it, U.S. Bank, National Association and SouthState Bank, National Association have 15 loans each ($14.7 million and $12.5 million), Newtek Bank, National Association with 13 ($9.4 million) and Wells Fargo Bank National Association with 13 ($8.1 million). Texas leads with 87 loans, then California with 82, Florida with 64, Arizona with 33 and Georgia with 30.

Losses arrive early

SBA's file shows a charge-off floor of 2.5% for the 278 school loans disbursed over FY2017 to FY2021, and 2.2% within five years, so nearly all of the losses came early. Cancellation is 11.3% at minimum and 12.3% at most. For a lender, early losses point at the first enrollment cycles: a school that does not fill its classrooms in its first years often does not recover. Approvals peaked at 84 in FY2025; dollars peaked earlier, at $84.1 million in FY2018.

What a school study has to prove

Before a lender commits, a feasibility study for a 7(a) school loan has to test demand from enrollment trends, the tuition the local market will bear and the competing district and private options; the cost of the facility or the acquisition price against verified enrollment; debt service coverage at current enrollment, with a downside case; and, where a building secures the loan, an appraisal that states both its value as a school and its value for other uses. For a for-profit operator buying an existing school, the study should also test accreditation, licensing and staff retention through the change of ownership.