SBA 504 Restaurant Feasibility Study in Illinois

Restaurants as real estate in Chicagoland

Illinois full-service restaurants borrowing through SBA 504 are buying or building property, and the figures show it. The program approved 214 loans from FY2017 to FY2026, worth $159.0 million, ranking Illinois 4 among states, and the class is 1 of 39 among Illinois asset classes. The median loan, $561,500, is 0.93x the national 504 median for restaurants, and the central half of tickets runs $355,250 to $946,750. Franchise brands took 6.1%. Those figures are given here without further comment.

Two development companies dominate

Of the three development companies listed, Small Business Growth Corporation holds 123 loans ($97.9 million) and SomerCor 504, Inc. 79 ($55.5 million); Rockford Local Development Corporation follows far behind with 5 worth $3.0 million. These are the holders SBA reports for the loans today. Cook County has 107 loans, DuPage 20, Kane 16, and Lake 12, with McHenry and Will at 7 each, so the book sits mostly in the Chicago area.

Outcomes

Illinois restaurant approvals through FY2024 were cancelled at 17.8% or more, and 22.5% when undisbursed loans are counted, meaning a large part of approvals never reached funding. In the funded cohort of 72 loans, the charge-off floor is 1.4%, identical inside five years. Those are floors on a small cohort. Volume was 22 loans in FY2017, only 8 in FY2021, then 40 loans worth $30.7 million in FY2022, 26 in FY2025 and 19 in FY2026. Cancellation here is a leading risk to the schedule.

The Illinois restaurant property test

Because 504 financing combines a bank loan and a development-company loan for property and lasting equipment, the study must treat the restaurant as a business and as a building. It should test sales per seat and per square foot, the competition within the trade area, labour and food cost, and whether the owner-occupier can carry the debt if sales drop. On the property side it must show site control, zoning, parking, a construction budget with contingency and the value of the building if the restaurant fails, since a special-purpose kitchen has limited alternative use. An appraiser will value both parts, and a lender will want coverage from the business alone. Equipment financed alongside the property should be listed separately with its useful life, and a rental figure for the building, if another operator had to take it over, should appear in the report.