Restaurant Feasibility Study in Rhode Island

Restaurants dominate Rhode Island's SBA lending

Sit-down restaurants are Rhode Island's leading SBA class, ranking 1 of 39 by loan count, and the location quotient of 1.63x shows them taking far more of the state's approvals than they take nationally. Over FY2017 to FY2026 the state approved 237 full-service restaurant loans worth $87.7 million, which ranks Rhode Island 34 of 54 among states on raw volume. The tickets are small: the median of $150,000 is 0.55x what full-service restaurants borrow nationally at the median. The median and both outcome floors are read here as plain figures.

A large 504 share

SBA 504 carried 55 of the restaurant loans and 7(a) 182. Ocean State Business Development Authority holds 27 of the 504 loans worth $16.7 million, Bay Colony Development Corporation 17 and New England Certified Development Corporation 7. Santander Bank, National Association leads 7(a) with 31 loans worth $8.0 million, followed by Beacon Bank and Trust with 15 and BankNewport with 14, each of those worth $1.3 million, then Eastern Bank with 12 and Citizens Bank, National Association with 11. Rhode Island restaurant approvals mostly sit between $89,300 and $445,000. Franchising is rare at 4.2%. Providence County holds 121 approvals, Kent 37, Newport 33 and Washington 30. FY2017 and FY2018 each saw 37 approvals, against 10 in FY2020.

Floors above the class

Rhode Island restaurant approvals dated FY2017 to FY2024 were cancelled at a floor of 17.0%, or 17.6% counting undisbursed loans. Rhode Island's 103 restaurant loans funded in FY2017 to FY2021 carry 7.8% in charge-offs to date and 2.9% within five years, so losses have often come after the early years. A lender will notice both.

High floors on small loans mean a Rhode Island restaurant study has to do a double job: get the deal to closing and keep it solvent after the opening years. For closing, the lease or purchase, the liquor license, permits and a contractor's bid should be secured before approval. For durability, demand has to be tested by season as well as by location, with the resident base, summer and visitor traffic where relevant, and the other dining rooms competing at that price point. The concept's seats, turns and check average must add up to sales the site can support, and the budget must include kitchen equipment, build-out and pre-opening costs. Debt service coverage should hold in a weak month and a weak year. Where 504 buys the building, an appraisal of a restaurant property rests on its location and reuse, and the study should give that value a documented income basis.

These are cohort floors that open Rhode Island loans can still raise, and the lenders named are the loan holders SBA currently reports.