Liquor Store Feasibility Study in California

California liquor store loans almost never fail

The California liquor store record is defined by how rarely its loans go bad. Of the 556 liquor store loans that funded in FY2017 to FY2021, only 0.18% have been charged off, all of it inside five years of approval. This charge-off floor sits below the class nationally and clears our distinctness margin against California's lending in every industry too. It is a floor, and open loans could still fail, but on a cohort this large it is a strong result. No state outranks California here: it is 1 of 53 for liquor store lending, with 1,227 approvals worth $740.1 million from FY2017 to FY2026; the location quotient, 1.44x, shows the class weighing more in California's SBA lending than nationally. Liquor stores place 7 of 39 among the state's classes.

Independent stores and a few community banks

This is an independent business: franchise codes appear on just 0.08% of loans. SBA 7(a) carried 1,189 loans and SBA 504 only 38. The median loan is $430,000, 0.96x the class median across all states, with the central half of approvals between $230,500 and $770,000, a band wide enough for a store purchase with its stock and license. A handful of banks carry the market: Bank of Hope with 164 loans, Open Bank with 144 worth $114.4 million, PCB Bank with 122, American Continental Bank with 87 and Hanmi Bank with 83. The Mortgage Capital Development Corporation is the most active 504 lender with 12. Los Angeles County dominates with 539 loans, far ahead of Orange at 103 and San Bernardino at 82. FY2026 set the series high at 149 loans and $111.7 million.

Where the study should focus

Cancellation is the more ordinary risk: at least 10.0% of California liquor approvals dated FY2017 to FY2024 fell away through cancellation, and counting undrawn loans lifts that only to a ceiling of 10.1%. Where the deal is a store purchase, a cancelled approval usually means a deal that changed or fell through before closing. A California liquor store study is usually a study of an existing store, and it has to verify sales from the seller's records against the store's tax filings and purchase invoices, test lottery, tobacco and alcohol margins separately, and check the competition within the store's walking and short-drive trade area. It has to confirm the license transfer path and timeline, and show debt service coverage on verified, not stated, earnings. Where the building is included, the appraisal will treat it as small retail space, so the study should not lean on the business to support the property's value.

No class limitation applies in our asset map. Loans fall where the lender coded the store's business, and both rates are floors.