Liquor Store Feasibility Study in Michigan

Michigan liquor deals often unwind after approval

The cancellation rate is what separates Michigan liquor store lending from the state's SBA record as a whole and from liquor stores nationally. Of loans approved in FY2017 to FY2024, 17.0% were cancelled after approval, and 18.6% once the still undisbursed loans are counted as cancelled. That is above Michigan's rate for all classes and above liquor stores nationally. For a borrower it means an approval letter is not the finish line; for a lender it means time spent on deals that do not close.

Liquor stores matter in Michigan. The state approved 397 SBA loans to them between FY2017 and FY2026, for $252.5 million, and ranks 6 of 53 among states. Within Michigan the class is 3 of 39 by loan count, while a location quotient of 1.59x puts its share of the state's loans well above the national share. The median loan is $480,000, 1.07x the class median nationwide, and loans in the middle half run from $100,000 to $970,000. Deal size has grown: FY2017 brought 50 loans for $15.5 million, while FY2025 brought 52 for $45.1 million.

Independent stores, two kinds of lender

Franchise borrowers are only 1.0% of the count, so these are independent stores, and 386 of the 397 loans were 7(a), with 11 under 504. The Huntington National Bank holds 124 loans for $30.9 million, a book of smaller credits, while First Internet Bank of Indiana holds 56 for $70.8 million, a book of much larger ones. Fifth Third Bank (32 loans), United FCU (23 loans, $24.0 million) and Byline Bank (20 loans, $24.0 million) follow. Wayne County accounts for 168 loans, far ahead of Oakland (55) and Macomb (39). Losses have been modest: of 152 loans disbursed in FY2017 to FY2021, 2.6% have been written off to date and 0.66% before year five, a little below Michigan's floor and close to the class nationally.

What a Michigan liquor store study must cover

Since the risk here sits between approval and closing, the study should treat every closing condition as a test: the license transfer and its approval timeline, the lease or purchase of the building, inventory to be bought at closing, and the equity the buyer brings. For an acquisition, demand is best proven with the seller's verified sales and tax returns, measured against nearby stores and grocery competition. Cost must separate goodwill, inventory and real estate. Debt service coverage should rest on verified, not stated, cash flow. If the building is included, the appraisal must value it apart from the business so the lender knows what the collateral supports.

The liquor store class has no limitation line; its loans are coded to the industry each borrower named, and every rate is a floor for its cohort.