SBA 504 Liquor Store Feasibility Study

Liquor store owners who buy the building

The 504 file holds 302 liquor store loans approved in FY2017 to FY2026, for $251.6 million. No metric here differs enough from the 504 program or from liquor store lending in both programs to be singled out, so the value of the page is in how the loans are built. The median is $555,500; the middle half of loans goes from $324,000 to $1.0 million. Only 2.3% are franchised.

Lending stepped up from 15 loans in FY2019 to 46 in FY2021, and dollars peaked at $44.2 million in FY2022; since then the count has moved between 22 and 36 a year, with 28 loans and $27.1 million in FY2026. The lender list is spread out. Florida Business Development Corporation has 21 loans and $20.5 million and The Mortgage Capital Development Corporation 18 and $20.4 million; B:Side Capital and New England Certified Development Corporation have 17 each, B:Side Capital at the larger dollar figure of $22.2 million against $13.7 million; Empire State Certified Development Corporation has 16 and $14.4 million. California leads with 38 loans, then Georgia with 32, Massachusetts with 27, Colorado with 24, Minnesota with 19 and Rhode Island with 15.

Cancellations are the exposure

Liquor store loans approved over FY2017 to FY2024 lost at least 15.5% to cancellation, a figure that could be as high as 21.8% counting undisbursed loans as cancelled. The charge-off floor is 0.00% across the 114 loans disbursed in FY2017 to FY2021, with 0.00% inside five years. Stores whose owners hold the real estate have, so far, produced no recorded loss in this program, though both rates are floors and the cohort is modest.

What the liquor store study needs to settle

The class carries no limitation line. A feasibility study for a 504 liquor store has to test whether the license can transfer to the buyer on the timeline of the loan; demand from the trade area and from the competing stores; cost of the building and any remodel; debt service coverage on gross margins the store has proven; and an appraisal that splits real estate value from the business and its license.