Restaurant Feasibility Study in Massachusetts

Smaller loans and fewer losses in Massachusetts

Restaurant lending in the state passes our distinctness margin on loan size and on losses, and both are good news for lenders. The median full-service loan here is $180,000, 0.65x the class median nationally, and the charge-off floor is low: 3.4% of the 499 Bay State restaurant loans disbursed in FY2017 to FY2021 have gone to charge-off, below the class's national floor, with 2.0% failing inside five years. Each figure differs from both the Massachusetts all-industry record and full-service restaurants nationwide by more than our margin. The charge-off rate is a floor and can still rise, but on a cohort of this size the result is solid. Full-service restaurants are the state's leading SBA class, 1 of 39, and Massachusetts ranks 11 of 54 among states, with 1,126 approvals worth $404.9 million from FY2017 to FY2026; its location quotient for restaurants is 1.18x.

A strong 504 base and local banks

The middle half of approvals runs from $65,000 to $450,000. SBA 504 carried 252 loans and SBA 7(a) 874, a mix that shows many Massachusetts operators owning their buildings even at modest loan sizes. Bay Colony Development Corporation, with $54.6 million, ties Granite State Economic Development Corporation, with $53.3 million, at 87 loans apiece, with New England Certified Development Corporation at 34 and Cape & Islands Community Development, Inc. at 18. Eastern Bank leads the 7(a) side with 189 loans and Santander Bank, National Association follows with 128, then Rockland Trust Company with 60. Franchising barely figures at 1.6% of loans, so nearly all of these are independent restaurants. Middlesex County leads with 234 loans, then Suffolk with 180 and Essex with 146, while Barnstable County on Cape Cod has 104. Volume fell to 55 loans in FY2021 and rebuilt to 143 in FY2025.

Where the risk still sits

Cancellation is the live risk: at least 13.3% of Massachusetts restaurant approvals from FY2017 to FY2024 did not proceed, and 14.2% once undrawn loans count. For a borrower that means permits, licences and the lease need to be settled early. A study for a Massachusetts restaurant has to measure demand in the immediate neighbourhood and, on the Cape and the islands, by season, map competitors by concept and price, cost the kitchen and fit-out against a loan that typically sits near $180,000, and show debt service coverage after rent and labour on covers the room can actually turn. For a 504 purchase, the appraiser's concern is the building's worth with the restaurant gone, so the study should supply market rent evidence for it.

The class has no limitation in our asset map, and each Massachusetts loan follows the industry code its lender chose.