Grocery Store Feasibility Study in New York

New York grocers: more cancellations, more losses

New York's grocery store loans differ from their parents on both outcome measures, and in the same unwelcome direction. At least 20.0% of grocery approvals in New York during FY2017 to FY2024 never went forward and were cancelled; the ceiling that treats undrawn loans as cancelled is 20.7%. And of the 250 grocery loans that funded in FY2017 to FY2021, 12.8% are already charged off, with 6.0% failing inside five years. Both floors sit above the grocery class nationally and clear our distinctness margin against New York's lending in every industry as well. They are floors, so the cohort's eventual losses can only be higher. Loan size, by contrast, is ordinary: the median of $352,000 is exactly 1.00x the class median across the country.

A big, borough-heavy market

Grocery is unusually important in New York's SBA lending. The location quotient is 2.15x, the state ranks 2 of 55 for grocery loans, and grocery places 6 of 39 among New York classes, with 551 approvals totalling $497.9 million over FY2017 to FY2026. Kings County alone has 124 loans, Queens 82, New York County 68 and the Bronx 62, so this is mostly a city story. SBA 7(a) carried 524 loans and SBA 504 just 27, and franchising is rare at 1.8% of loans, which leaves independent grocers as the core borrower. NewBank leads with 87 loans worth $139.6 million, then TD Bank, National Association with 71 smaller loans worth $8.6 million, and Bank of Hope with 37 worth $55.2 million. The span between $100,000 and $1.3 million that holds the middle half of approvals runs from equipment and inventory lines to full store purchases. Volume was highest at the start of the period, 88 loans in FY2017, and the dollars fell to $22.1 million in FY2024.

What lenders and a study have to face

For a lender, this record says New York grocery deals go wrong on either side of the closing table. For a borrower, it says the underwriting will be tight and the feasibility evidence had better be strong. A study for a grocery store in New York has to measure demand block by block, since a neighbourhood grocer draws from a walking or short-drive radius, and map the supermarkets, chain pharmacies, delis and delivery services competing for the same basket. It has to test gross margin and shrink against the store's actual history, if it is a purchase, or against comparable stores if it is new, cost the refrigeration and fit-out, and prove debt service coverage that can absorb a rent increase at renewal. If the store's real estate is financed, the appraiser will look at it as retail space; the study's job is to show what rent the grocery can bear.

Our asset map gives this class no special limitation. Loans sit under the grocer's line of business as entered at approval, and both outcome rates are floors.