Charge-off

Definition

A lender writing a loan off as a loss and no longer expecting repayment.

Why It Matters

In the SBA's loan-level data it is the visible failure marker for acquisition loans. Charge-off rates by industry are the closest public record of which acquisitions actually fail, and lenders price and screen with them whether or not the buyer ever looks.

In numbers: In the SBA's own loan-level file, roughly 4% of the FY2018-19 acquisition loans had been charged off within about seven years: the bank wrote off the balance, and the personal guarantee kept the borrower attached to it.