Grocery Store Feasibility Study in New Jersey

A big grocery market with a hard loss record

New Jersey is one of the larger SBA grocery markets: 164 approvals from FY2017 to FY2026, worth $121.5 million, place it 8 of 55 among states, and a location quotient of 1.20x shows independent grocers taking a bigger share of New Jersey SBA lending than they do nationally. Groceries rank 12 of 39 among New Jersey asset classes. The median loan is $324,500, 0.92x the grocery median nationally. Size, cancellation and charge-off are read here as plain figures, though the outcome figures still deserve a lender's closest reading.

Losses that arrive after year five

The New Jersey charge-off floor is 12.9% of the 70 grocery loans disbursed in FY2017 to FY2021, yet the New Jersey five-year rate is 0.00%: not one of those grocery losses fell inside the first five years after approval. New Jersey grocers that failed did so after surviving their early years, so the losses came after the opening years. Cancellation is also high, at a floor of 16.7% for New Jersey grocery approvals over FY2017 to FY2024 and a ceiling of 17.4%. Every one of these figures is a floor.

Lenders and counties

SBA 7(a) dominates with 153 loans; SBA 504 has 11, and Trenton Business Assistance Corporation's 9 development company loans total $9.6 million. TD Bank, National Association holds the most guaranteed loans, 32, but they total only $6.3 million, while NewBank's 19 reach $21.9 million and Bank of Hope's 6 reach $12.4 million. Manufacturers and Traders Trust Company has 13 small loans totalling $838,700, and PNC Bank, National Association 6. The band from $66,375 to $1.1 million covers the middle half of New Jersey approvals. Franchising is almost absent at 0.61%. Essex County leads with 23 approvals, Passaic has 20, Bergen 16, Middlesex 14 and Ocean 13.

Given a charge-off floor of 12.9% that built up after year five, a feasibility study for a New Jersey grocery store has to test the long run, not the opening. It should measure the trade area's households and spending, map the supermarkets, discount chains and ethnic grocers that compete for them, and set gross margin, shrink and labour against a loan near $324,500. Debt service coverage has to hold under a new competitor and a lease reset, and if the store owns its building, the appraisal must value the property for a buyer who is not a grocer.

No coding limitation is recorded for grocery stores; each New Jersey count rests on the industry code SBA holds for the loan.