Restaurant Feasibility Study in Virginia

Virginia restaurants: few cancellations, high charge-offs

Virginia's full-service restaurant lending pairs a cancellation floor and a charge-off floor that pull in opposite directions, and both stand apart from Virginia's lending overall and from sit-down restaurants in the rest of the country. Cancellation is low: the floor is only 9.0% of Virginia restaurant approvals of FY2017 to FY2024, rising to 10.6% when undrawn loans are added. Losses are high: of the 239 Virginia restaurant loans funded in FY2017 to FY2021, 10.9% have ended in charge-off already, and 6.7% failed within five years. Both are floors, and open loans can still fail. In plain terms, few Virginia restaurant approvals are cancelled, and then a larger share of the funded loans go wrong.

Size, lenders and Northern Virginia

Loan size is typical: the median is $275,000, 1.00x the full-service median nationally, with half of approvals between $80,000 and $598,000. Restaurants lead Virginia's SBA classes at 1 of 39, their location quotient is 1.01x, and the state ranks 18 of 54, on 565 approvals worth $253.3 million from FY2017 to FY2026. Manufacturers and Traders Trust Company holds 87 loans worth $17.5 million, TD Bank, National Association 29, Hanmi Bank 27 worth $14.2 million and Newtek Bank, National Association 26. SBA 504 carried 60 loans against 505 under SBA 7(a), led by Business Finance Group, Inc. with 28 and 504 Capital Corporation with 19. Franchise codes appear on 12.7% of loans. Fairfax County alone has 133 loans, with Loudoun at 55 and Arlington at 31. FY2024 and FY2025 were the busiest years, with 72 and 76 loans.

What the study should do with it

When deals close easily and fail later, the check has to happen before the commitment. For a borrower, the charge-off floor argues for stress-testing sales and margins rather than trusting the approval momentum. A Virginia restaurant study has to test demand trade area by trade area, measuring residents and daytime workers and counting the competing restaurants by concept and price point, and it must be honest about how long a new restaurant takes to build its trade. It has to budget the kitchen and fit-out against a ticket near $275,000, test food, labour and occupancy costs against a realistic menu, and show debt service coverage in year two and year three, when early momentum fades. Where real estate is financed, the question for the appraisal is whether the property would still carry the loan under a different operator, and the study should answer it.

No coding limitation applies to the Virginia class; loans sit under the industry code recorded in SBA's files.