Restaurant Feasibility Study in Colorado

Sit-down restaurants are Colorado's single busiest SBA class, 1 of 39 by loan count, with 802 full-service restaurant loans and $488.5 million approved across FY2017 to FY2026. Nationally Colorado places 14 of 54 for the class, and its location quotient of 0.96x shows restaurants weighing about what they do in the country at large. A Colorado restaurant loan is larger than the class's national median, at $350,000 or 1.27x, its middle half running $150,000 to $766,850. Our margin test, run on the median, cancellation and charge-off against Colorado and against the class, flags nothing here as distinct, so the interest lies in who lends and how the loans have done.

A strong 504 channel

SBA 504 plays a real part in Colorado restaurant lending, with 114 loans under 504 beside 688 under 7(a), and one development company stands out. B:Side Capital holds 74 of those 504 loans for $56.5 million, far ahead of Mountain West Small Business Finance (20 loans, $18.5 million) and Preferred Lending Partners (13). The 7(a) field is led by The Huntington National Bank (83 loans, $22.4 million) and KeyBank National Association (53 loans, $25.7 million), then U.S. Bank, National Association (40), JPMorgan Chase Bank, National Association (32) and Newtek Bank, National Association (29 loans, $19.2 million). Franchise borrowers are just 9.4%, so most of these are independent restaurants. Denver (138 loans), El Paso (106) and Arapahoe (99) lead, with Boulder (66), Jefferson (59) and Douglas (55) behind.

Outcomes better than the class nationally

Of 304 Colorado restaurant loans disbursed in FY2017 to FY2021, charge-offs to date come to 4.3%, and 2.3% inside five years of approval. That floor is close to Colorado's for all classes and lower than full-service restaurants show nationally, though it will rise as open loans age. Cancellation after approval was 12.7% of FY2017 to FY2024 approvals, or 14.2% when undisbursed loans are treated as cancelled. Volume fell to 49 loans in FY2020, then climbed to 121 for $75.5 million in FY2025 before easing to 83 in FY2026.

What a Colorado restaurant study should prove

For an independent restaurant, the concept and the operator carry the credit, so the study has to show both. Demand means covers per day the location can win against the restaurants already in the neighborhood, with any seasonal swing from tourism or mountain traffic shown month by month where it applies. Cost must separate kitchen equipment, the dining room build out and, in a 504 deal, the building itself. Debt service coverage should hold on a realistic covers ramp and on food and labor costs at current levels. Where a 504 loan buys the property, the appraisal must say what the building is worth to another restaurant operator, or to a different use, if the concept closes.

The full-service class has no limitation line. Its loans fall under the industry code the borrower gave SBA, and all rates are cohort floors.