Restaurant Feasibility Study in the Santa Cruz-Watsonville, CA Metro Area

Full-service dining around Santa Cruz and Watsonville

In the Santa Cruz-Watsonville area, full-service restaurants hold first place among the classes, 1 of 39, which makes them the area's leading class in SBA lending. Between FY2017 and FY2026 the area approved 37 loans worth $22.9 million for the class. A location quotient of 1.46x shows restaurants taking a larger slice of Santa Cruz lending than of lending nationwide, although the area is only 127 of 821 in the national ordering. The median loan of $345,000 is 1.25x the class's national median.

Loan sizes, programs and holders

The central half of the loans spans $100,000 to $810,000, so the range from a small fit-out to a purchase of the premises is wide. On the program side, SBA 7(a) is 30 loans and SBA 504 is 7. Santa Cruz County, CA carries all 37. West Coast Community Bank is the 7(a) holder that prints, with 19 loans and $9.7 million, and these are present holdings only. Franchise share is not printed, so brands stay out of this reading.

Of the area's approvals from FY2017 to FY2024, at least 16.7% were cancelled after approval, and that percentage is a floor rather than a settled total. The companion figure that treats loans still awaiting disbursement as cancelled is held back, as is the charge-off rate, because a cohort under 30 loans gets no rate from Loan Analytics. Volume prints for three years: 5 loans and $778,500 in FY2017, 9 loans and $4.5 million in FY2019, and 5 loans and $3.0 million in FY2023. Remaining years stay hidden, since a handful of loans cannot be shown, and hidden is not empty. Membership in the area depends on each loan's project county, read against the July 2023 list.

What a Santa Cruz restaurant study has to test

A cancellation floor of 16.7% is the number a sponsor here should respect, because it shows that a meaningful part of approved projects never reached funding. A feasibility study should therefore test whether the lease, permits and equipment are secured before a loan is sought. It should size covers, check ticket and labour against a realistic opening ramp, and measure coverage of the debt payment in a conservative season, since a typical loan of $345,000 leaves little room for a slow first year. If premises are being bought, the real property has to be valued by itself, with the restaurant business valued apart.