Grocery Store Feasibility Study in Michigan

Michigan: third in the country for grocery loans

Few states finance more independent grocery stores through SBA than Michigan. It ranks 3 of 55 for grocery store loans, with 187 approvals worth $168.9 million from FY2017 to FY2026, and a location quotient of 1.20x shows grocery is overweight in Michigan's SBA mix; inside the state the class stands 12 of 39. The median Michigan grocery loan was $315,000, 0.89x the class median nationwide. The median and both outcome floors here are ordinary, so this is a cell defined by volume rather than by a different kind of loan.

The spread of Michigan grocery loans is very wide: Michigan's middle half reaches from $100,000 to $1.3 million. SBA 7(a) carried 176 approvals and SBA 504 only 11, and franchised stores are just 4.3%, so these are independent grocers. The Huntington National Bank holds 64 Michigan grocery loans worth $27.0 million, while Fifth Third Bank's 24 total more, $37.4 million, and First Internet Bank of Indiana's 8 add $18.3 million, so those holders carry the larger dollars. Great Lakes Commercial Finance holds 6 of the 504 loans. Wayne County dominates with 49 approvals, followed by Macomb with 23, Oakland with 20 and Kent with 19. FY2023 was the busiest year at 28 loans for $25.2 million.

High cancellations, late losses

Michigan cancelled no less than 13.8% of grocery loans approved in FY2017 through FY2024, and up to 15.6% if loans not yet disbursed are counted. For a Michigan buyer that is a reason to pin down the seller's records and the lease or property terms early. Losses have come late: of the 81 grocery loans Michigan disbursed during FY2017 to FY2021, 3.7% are charged off, yet 0.00% before their fifth year. Both are floors.

What a Michigan grocery study has to show

A study for a Michigan grocery store must start with demand at the neighbourhood level: households, income, and the supermarkets, discount grocers and dollar stores already serving them. For an acquisition, it should verify sales, margins and shrink from the seller's records. Cost testing covers equipment, refrigeration, inventory and any building work. Debt service coverage depends on thin grocery margins, so a small fall in sales matters, and because Michigan losses arrived after year five, the study should test the later years of the term as well as the first. Where the loan includes the building, the appraisal must value it as retail real estate apart from the business.