Liquor Store Feasibility Study

Counts from FY1991, dollars from FY1994

The liquor store series is complete for counts but not for money at its start. FY1991, FY1992 and FY1993 print 132, 140 and 142 7(a) approvals with their dollars withheld, and 504 shows 3, 1 and 4 loans in those years with dollars marked as fewer than 5 loans. FY1994 is the earliest year in which both 7(a) columns carry values, at 184 loans and $36.4 million, alongside 9 504 loans for $1.9 million. Any growth claim a study makes about liquor store lending in dollars therefore has to start in FY1994, while a count series can reach back to FY1991. The note under the table adds a second caution: in any year where the SBA files carry a missing or unusable industry code on too many loans, the liquor count becomes a floor. A market section that sets a modern year beside the early 1990s should say so, because a credit reviewer who knows the files will ask.

The climb to the FY2007 count peak

From FY1994 the class grew with only brief pauses. 7(a) approvals reached 313 in FY1995, 423 in FY2000, 594 in FY2002, 779 in FY2004 and 907 in FY2005, and FY2007 set the count that still stands as the high for the class: 925 loans for $286.7 million. Neither FY2021, at 800 loans, nor FY2025, at 748, came back to it. Dollars tell a different story. FY2007's $286.7 million is smaller than every year from FY2015 onward, and FY2017 alone approved $380.4 million on 747 loans. The liquor store loan of the FY2017 to FY2026 window is a bigger loan than the one lenders made at the count peak, and a study that cites the FY2007 book as precedent for a present request will understate what lenders now finance in this class.

FY2008 and FY2009: credit thinned fast

Then the series broke. 7(a) approvals fell from 925 in FY2007 to 674 in FY2008 and 406 in FY2009, the smallest count since FY1999's 380, and dollars fell from $286.7 million to $216.9 million and then $120.4 million. 504 followed, from 43 loans and $19.0 million in FY2007 to 22 loans and $11.7 million in FY2009. These rows measure lender appetite, not store sales, and they should be read that way: the record cannot show that liquor stores held their revenue through the recession, only that credit for buying and building them thinned quickly. For a borrower whose plan leans on refinancing the loan, selling the store or bringing in a partner within a few years, FY2009 is the year a lender will point to. The study should show the loan serviced from the store's own cash flow, without assuming a sale or a refinance will be on offer when the credit cycle turns.

The recovery came in dollars first

Counts climbed back slowly: 509 in FY2010, 528 in FY2011, 553 in FY2012, a dip to 532 in FY2013, then 613 in FY2014 and 765 in FY2015. Dollars moved faster. FY2013's $243.7 million came on fewer loans than FY2012's $186.8 million, and FY2015's $360.3 million passed the FY2007 high of $286.7 million while the count was still well short of 925. FY2016 eased to 665 loans and $317.1 million. When money recovers ahead of the count, the loans coming back are larger, and in no later year has the money per loan fallen back to the FY2007 level. A lender looking at a liquor store request now will compare it with the ticket sizes of this rebuilt book, so the study has to break the project cost into its parts and show which of them, the license, the goodwill, the inventory or the real estate, is carrying the size of the loan.

FY2017 to FY2026: fewer loans, larger tickets

The window behind the rates on this page runs from FY2017 to FY2026, and it holds $4.68 billion of the $8.74 billion of 7(a) liquor store money approved since FY1991, on 6,438 of the 19,669 loans. Inside it, counts swing between 530 in FY2020 and 800 in FY2021, while dollars swing between $351.4 million in FY2018 and $708.6 million in FY2021, the largest year in the whole record. The direction of ticket size shows in the pairs: FY2019 approved 589 loans for $374.2 million and FY2020 approved 530 for $382.7 million; FY2022 approved 533 for $460.8 million; FY2026 approved 531 for $484.9 million, almost the FY2020 count with far more money. FY2025 was the busiest year of the window after FY2021, at 748 loans and $561.3 million. A study written now sits beside these years, and the loan it supports will be judged against a book in which fewer and larger liquor store loans are the norm.

The 504 line

The 504 side of the class is small at every point. Its total from FY1991 to FY2026 is 775 loans and $458.0 million, against 19,669 7(a) loans, and no year has passed 46 approvals, the FY2021 figure. Its dollar peak came a year later, $44.2 million on 40 loans in FY2022. The line rose sharply out of FY2019, when 15 loans carried $9.9 million, to 34 loans and $23.3 million in FY2020, and it has stayed between 22 and 46 loans a year since. Because 504 is confined to fixed assets, a 504 liquor store file is a real estate file first: the study must justify the land and the building at the value the appraiser will set, and then show the store's operating cash flow covering all of the project's debt service. The record also shows 504 approvals cancelled at a 15.5% floor, above the 12.6% for 7(a), so a 504 borrower should expect the lender to ask what could stop the closing.

New York and Los Angeles lead by count, Atlanta by money

The metro table opens with a near tie. Its first row, New York-Newark-Jersey City, carries 647 liquor store loans and Los Angeles-Long Beach-Anaheim 642, with $482.0 million and $400.5 million and medians of $450,000 and $406,000. Denver-Aurora-Centennial follows at 435 loans. Atlanta-Sandy Springs-Roswell ranks fourth by count with 347 loans, yet its $793.1 million tops every metro's dollar total and its $1.8 million median is the highest on the table, well clear of the next, Trenton-Princeton at $800,000. Atlanta holds $793.1 million of Georgia's $977.7 million, so the state row is weighted heavily toward one metro. A liquor store study in the Atlanta metro must compare its request with Atlanta's own record; one elsewhere in Georgia has to show that its own size is supported locally, rather than borrowing Atlanta's numbers to justify it.

Loss floors at metro level

At metro level, charge-off floors are scarce. New York-Newark-Jersey City prints 1.9% and Denver-Aurora-Centennial 2.4%; every other metro is either withheld under the page's identification guard or, for Rochester and Pittsburgh, not reported, their cohorts being under 30 loans. Blank does not mean zero: a study must not treat Los Angeles or Atlanta as loss-free because their floors are blank. Denver's 2.4% beside Colorado's 3.2% does carry information: on these floors, the Colorado loans outside the Denver metro, taken together, run above the state figure. The record does not say which of those markets carries the losses, so a study in Colorado Springs, Greeley, Boulder or Fort Collins-Loveland should expect the lender to ask, and should answer with local competition and sales evidence rather than the Denver figure.

The state median hides its metros

Within one state, metros can sit far apart. In New York, the New York-Newark-Jersey City row, a metro that crosses into New Jersey, lends at a $450,000 median, while Buffalo-Cheektowaga lends at $137,500, Albany-Schenectady-Troy at $201,500 and Rochester at $95,400, and the state's own median is $225,000. Ohio is lower still: Columbus prints $65,000, the smallest median on the metro table, Cleveland $150,000 and Cincinnati $276,000, beside a state median of $119,300. Texas runs the other way, with Dallas-Fort Worth-Arlington at 141 loans and a $652,200 median, against Houston at 39 loans and Austin at 31, both at $350,000. A study that quotes only the state median for a store in Buffalo or Dallas would mislead the lender, in opposite directions. Ours sets the request against the metro row where one exists and says so when the metro has too few loans to stand on its own.

California's metros

California's 1,227 loans spread across more metros on the table than any other state's: Los Angeles-Long Beach-Anaheim (642), Riverside-San Bernardino-Ontario (135), San Francisco-Oakland-Fremont (120), San Diego-Chula Vista-Carlsbad (67), Sacramento-Roseville-Folsom (62), Fresno (28) and San Jose-Sunnyvale-Santa Clara (27). Their medians climb from Riverside's $335,000 through Los Angeles at $406,000 and San Francisco at $431,000 to Sacramento's $493,000 and Fresno's $545,000. None of them prints a charge-off floor; the state prints 0.18%, the lowest floor above zero in the state table. A California study can cite that state figure, but it should name its own metro's median as the size benchmark, because a Riverside request and a Fresno request are measured against different books.

Metro cores run above their states

In several states the main metro lends well above the state median. Detroit-Warren-Dearborn prints $661,000 against Michigan's $480,000, Milwaukee-Waukesha $730,000 against Wisconsin's $340,000, Indianapolis-Carmel-Greenwood $626,100 against Indiana's $554,600, and Phoenix-Mesa-Chandler $750,500, the same as Arizona's median. Philadelphia-Camden-Wilmington, a metro that crosses state lines, prints $700,000 against Pennsylvania's $491,700. Detroit is also the dominant Michigan market, with 279 of the state's 397 loans. For a lender, a metro core loan above the state median is normal rather than a warning sign; what the study must prove is that the store's sales volume can carry that size, using the metro's own trade-area evidence rather than a statewide figure that blends in other markets.

Smaller-ticket metros

The low end of the metro table is just as useful. Boston-Cambridge-Newton has 152 loans but only $60.3 million and a $174,000 median, and Providence-Warwick prints $271,000 on 79 loans; the Massachusetts state median of $245,000 sits between them. Kansas City shows 65 loans at $253,700, and Miami-Fort Lauderdale-West Palm Beach only 32 loans at $225,000, a thin record beside Florida's 134 statewide. Where a metro's liquor store loans are small and numerous, a lender has seen plenty of modest store purchases and will test a new request against them: a buyer asking for more than the local norm needs a study that explains the gap with the store's own sales history, its inventory and the price its license commands.

Quartiles by program

7(a) liquor store loans run from a lower quartile of $150,000 to an upper quartile of $927,000, around a $440,000 median. The 504 quartiles run from $324,000 to $1.0 million, around $555,500. Both programs share the ground above $324,000, but below it they part: the 7(a) lower quartile sits at $150,000, while 504 barely reaches that low, with 15 loans at $150,000 or less across FY2017 to FY2026. For a borrower the quartiles are a practical test. A request near the 7(a) median is ordinary in this class; one above $927,000 sits beyond the 7(a) upper quartile, where reviewers read more carefully; one above $1.0 million on the 504 side is beyond that program's upper quartile. The sizing section of the study should place the request against these marks plainly, before any argument about why the size is justified.

Loans in the middle band, dollars in the top band

The size bands show where lenders' money actually sits. Under 7(a), the band beginning above $350,000 holds more loans than any other, 2,192 for $1.38 billion, but the top occupied band, with only 469 loans, holds the most dollars, $1.53 billion. The band between them adds 941 loans and $1.34 billion. At the bottom, 1,657 loans of $150,000 or less total $123.2 million, and the next band up holds 1,179 loans for $315.9 million. Put plainly, the typical liquor store loan is mid-sized, but the dollars of the class sit heaviest in loans in the millions, where a single failure costs the lender the most. That is where the feasibility study gets read hardest, and a request in those bands should expect separate questions on the value of the license, the real estate and the projected sales.

The 504 bands

The 504 distribution is shifted up. Its largest band by count is the same middle band, 134 loans for $81.6 million, but its largest by dollars is the next band up, 62 loans for $85.6 million, and 21 loans in the top occupied band carry $64.5 million. Only 15 504 loans sit at $150,000 or less, for $1.8 million, and 70 in the band above that, for $18.2 million. No liquor store loan of either program appears in the highest band on the table: 0 loans and $0. A 504 study therefore supports a project well above the 7(a) lower quartile, and its real estate section carries much of the weight, because the appraiser's value for the land and building sets the collateral the lender relies on.

What the floors measure

The program table adds the outcome record. For 7(a), 12.6% is the floor for cancellation among FY2017 to FY2024 approvals; for charge-off, among loans disbursed FY2017 through FY2021, the floor is 2.5% to date and 1.2% within 5 years of funding. Under 504 the cancellation floor is 15.5% and both charge-off floors are 0.00%. The gap between the 1.2% within 5 years and the 2.5% to date says that liquor store losses keep arriving after the fifth year; they are not confined to the opening period. A lender will ask the study to show debt service coverage well past the first years, through a lease renewal, a competitor's entry or a change in the state's license rules, and not only in the first stabilized year of the projection.

Sizing the request

Taken together, the size tables give a study its sizing checks. First, where does the request fall against the program quartiles, $150,000, $440,000 and $927,000 for 7(a), or $324,000, $555,500 and $1.0 million for 504? Second, which band carries it, and is that a band where loans are common or where dollars concentrate? Third, does the state or metro median, anywhere from Oregon's $109,850 to Georgia's $1.7 million, agree with the band the request sits in? A request that is large for its band and its place needs the study to explain why: a license that trades at a premium where few are issued, a building bought with the business, or inventory above the usual level. Each of those claims must rest on evidence the lender can verify.