Restaurant Feasibility Study in Arkansas

Arkansas's largest SBA class

Full-service restaurants are the single most financed class in Arkansas's SBA lending, standing 1 of 39 among Arkansas classes by loan count. That sounds remarkable, but the location quotient of 0.97x shows restaurants hold almost exactly their national weight in Arkansas; they lead the state because sit-down dining is a large SBA class nationally too. Arkansas ranks 38 of 54 states for these loans, with 165 approvals worth $58.9 million in FY2017 to FY2026. The Arkansas median was $225,000, 0.82x what full-service restaurants borrow at the national median; half of Arkansas approvals fall between $80,000 and $458,000. On our screen nothing in Arkansas stands out: its median, cancellation rate and charge-off rate each stay too near the Arkansas all-asset record or restaurants nationally.

These are mostly independent restaurants: franchised concepts take 16.4% of Arkansas approvals. SBA 7(a) funded 152 loans and SBA 504 13. Arvest Bank holds 37 Arkansas restaurant loans, worth $8.6 million, while Southern Bancorp Bank holds 13 worth $8.4 million, so its loans run far larger; Simmons Bank holds 9, Legacy National Bank 8 and Newtek Bank, National Association 8 worth just $1.0 million. Benton County leads with 46 approvals, ahead of Pulaski with 23, Washington with 18 and Garland with 13. FY2025 brought 26 loans, the busiest year, though for $7.8 million against $11.7 million on 20 loans in FY2017.

Arkansas losses are the warning

Arkansas restaurant losses are heavy. Of 73 Arkansas restaurants whose loans disbursed in FY2017 to FY2021, 9.6% have been charged off so far, and 5.5% failed before year five, so losses continued well after opening. Cancellations are lower, at 9.1% or more of Arkansas's FY2017 to FY2024 restaurant approvals; the ceiling is 9.1% too, because nothing from those years is still undisbursed. All of these are floors.

What an Arkansas restaurant study must prove

That loss record puts the burden on cash flow. An Arkansas study measures demand around the site itself: households, daytime workers and visitors, plus every Arkansas restaurant chasing the same diners, which reads differently in Benton or Washington County than in Garland or Sebastian. Arkansas cost work should price the purchase or build-out, the kitchen and the opening budget at current figures. Coverage of debt service has to hold through the full term on realistic covers, check averages and food and labor costs, and a loan near $458,000 needs far more cushion than one at the $225,000 median. With few 504 loans, the appraisal is usually a business value resting on earnings, which is why a lender will look hard at the owner's equity and experience.