Grocery Store Feasibility Study in California

California grocers borrow well above the national median

California is the largest SBA grocery market in the country, 1 of 55 among states, with 749 loans and $688.7 million from FY2017 to FY2026. The loans are big for the class. The median of $581,000 is 1.65x the national median, and it is the metric that separates this cell from California's all-asset lending and from grocery lending nationally. A quarter of the loans sit under $210,000 and a quarter over $1.2 million. Grocery ranks 13 of 39 among California's classes, and a location quotient of 1.41x shows grocers carrying more weight in California's SBA book than in the national one. Franchises barely figure, at 0.13% of loans, so the borrower is almost always an independent grocer rather than a brand unit.

SBA 7(a) carried 637 loans and SBA 504 carried 112. U.S. Bank, National Association leads with 59 loans and $53.1 million, followed by Bank of Hope with 46 loans and $22.6 million, Commonwealth Business Bank with 36 and $40.5 million, Hanmi Bank with 29 and $33.0 million and Open Bank with 27 and $21.5 million. Certified development companies hold the 504 loans: The Mortgage Capital Development Corporation 26 for $40.3 million, Business Finance Capital 23 for $29.5 million and California Statewide Certified Development Corporation 12 for $22.4 million.

Losses arrive early in grocery

Of the 330 loans disbursed from FY2017 to FY2021, 4.5% have been charged off so far, and 3.3% within five years of approval; most of the charge-offs happened early, by year five. Cancellation after approval is 10.8% of FY2017 to FY2024 approvals, or 11.7% when undisbursed loans are added. Lending peaked at 101 loans and $117.1 million in FY2021, dropped to 50 loans and $37.1 million in FY2024, and rebounded to 89 loans and $87.8 million in FY2026.

Questions a California grocery study must settle

Los Angeles accounts for 230 loans, far ahead of Alameda with 51, Orange with 39, and San Diego and San Francisco with 37 each. In those counties the demand test is household spending on food within the store's trade area, set against every supermarket, discount grocer and specialty market drawing from the same households. Cost covers refrigeration, fixtures, opening inventory and the lease or the building. Debt service coverage depends on sales volume and shrink, and the study should test what happens when a large competitor opens nearby during the first years. The appraisal should treat the real estate on its own.