SBA 504 Restaurant Feasibility Study in Arizona

Floor and ceiling far apart

Arizona's 504 restaurant loans carry a cancellation floor of 9.3% on approvals made through FY2024, and the figure doubles to 18.5% once approvals still undisbursed are counted as cancelled. A gap that wide means many approvals were still waiting for funds, and the true rate falls somewhere between the two figures. Too few loans funded early in the series to print a charge-off rate for Arizona, so the page withholds it; it is not zero.

SBA records 77 loans worth $72.8 million, with a median of $805,000, 1.33x the nationwide 504 typical for full-service restaurants. The bulk of loans runs from $408,000 to $1.2 million. Arizona is 15th among states for the program, and full-service restaurants hold third place among its 39 asset classes. Franchise ties account for 15.6% of loans.

The holders

Nearly half the count, 37 loans worth $37.0 million, sits with The Mortgage Capital Development Corporation, then 21 worth $17.6 million with Arizona Capital Source and 18 worth $17.5 million with CDC Small Business Finance Corp. These are the holders SBA lists and carry no implication about their practices. Maricopa County has 46 loans, Mohave 7, Pima 6, Pinal and Yavapai 5 each, and Coconino and Navajo 3 each, which places the record overwhelmingly in the Phoenix area.

Approvals were as low as 1 in FY2018 and 2 in FY2020, then rose to 14 in FY2025, with $17.9 million, the largest year. FY2024 and FY2022 each show 11.

What an Arizona 504 restaurant study must show

The 504 structure finances the real estate, so the study has to carry both a restaurant forecast and a property case. Show the build or purchase cost, the appraised value expected, and how the income from a dining room supports the combined payment. Check sales against seats and against the daytime and evening population nearby, with the competing restaurants within the trade area. Because the cancellation ceiling is high, demonstrate that the project is ready to proceed: site control, permits, contractor pricing and an equity contribution that is in hand. Brand fees belong in the budget for a franchise. Show coverage in a slower first year, and explain who could occupy the building if the concept failed. Explain, too, how the senior lender's share and the development company's share fit together in the cost of the building, and what equity the borrower puts in alongside them.