Coffee Shop Feasibility Study in Iowa

An all-7(a) class

Every one of the 57 Iowa coffee shop and snack bar loans approved between FY2017 and FY2026 used SBA 7(a), and the 504 count is 0. Together they come to $16.7 million. The class is plainly an operating-business product here: tenants fitting out a cafe, owners buying an existing shop or adding a drive-through. The median loan is $165,600, or 0.69x the nationwide median, with the central half spanning $91,500 to $340,000. A location quotient of 1.03x puts the state almost exactly at the national mix, and coffee shops rank 8 of 39 inside Iowa while the state sits 36 of 53.

Franchises, lenders and counties

Franchise affiliation reaches 31.6% of loans, so brands are a notable minority of the borrowers. Farmers State Bank holds 6 loans worth $1.3 million, The Huntington National Bank holds 5 worth $4.0 million, and Cedar Rapids Bank and Trust Company holds 5 worth $830,000. The Huntington figure implies a larger typical note than the community banks. Linn County leads with 13 loans and Polk County follows with 12, then Johnson with 4, with Black Hawk and Scott at 3 each. Eastern Iowa and the Des Moines area carry nearly all of the activity.

Reading the outcome numbers

Approvals through FY2024 show cancellation at 7.7% as a floor, and treating undisbursed loans as cancelled leaves it at 7.7%. A borrower should read that as a moderate chance that a plan changes between commitment and closing. Iowa coffee shops get no published loss rate, because the pool funded in FY2017 to FY2021 is smaller than 30 loans. That is not the same as having no charge-offs, and a lender should not infer a clean record. Small shops can also be sold on without a recorded default.

What an Iowa coffee study should test

An Iowa study should measure morning commuter traffic, college and campus draw, and the competing independent and chain shops on the same corridors, then test whether sales per square foot cover rent. Winter weather affects walk-in traffic, so a study has to check the coldest months for debt service coverage. It should compare drive-through potential with an inline storefront, and price equipment against loans near the state median. For an appraisal, espresso machinery and fixtures have limited resale value. Borrowers and lenders can judge a proposal against the approved-loan record shown on this page.