SBA 504 Restaurant Feasibility Study in Massachusetts

Real estate loans for dining rooms

In Massachusetts, full-service restaurants financed through SBA 504 form a book of 252 loans and $158.8 million for FY2017 to FY2026. The 504 program funds fixed assets such as buildings and equipment alongside a bank loan, and a certified development company stands behind each one, which is why this table lists development companies and not banks. On the program ranking Massachusetts is 3, and within the state restaurants are first of 39. The median loan of $503,500 is 0.83x of the national 504 median for the class, with a central half from $289,500 to $851,500, and only 1.2% of loans are franchised.

Two development companies, level

A tie sits at the top: Bay Colony Development Corporation ($54.6 million) and Granite State Economic Development Corporation ($53.3 million) each hold 87 loans. New England Certified Development Corporation has 34 loans and $23.1 million, Cape & Islands Community Development, Inc. 18 and $11.2 million, and South Eastern Economic Development Corporation 16 and $10.9 million. SBA's file lists each loan under whichever company holds or held it. Barnstable County has 45 loans, Essex 35, Middlesex 34, Plymouth 33 and Norfolk 25, a coastal weighting.

The cancellation floor, and clean charge-offs

The cancellation floor is 20.3% of FY2017 to FY2024 approvals, and 22.4% when undisbursed loans are counted. By contrast, the 89 loans of the FY2017 to FY2021 cohort show no charge-off at all: both measures print 0.00%. A floor of zero in a cohort this small is not proof that the loans are safe, since later years and the thin cohort leave room for change.

Steady, then rising

Loans fell to 17 in FY2019 and have climbed since, to 31 in FY2025 and 29 in FY2026, with FY2026 dollars of $21.1 million, so the program has gained ground in recent years.

Testing a Massachusetts restaurant purchase

A study under this program should test the real estate as hard as the restaurant: the price of the building, the equity the owner contributes, the term of any lease, and whether a restaurant is the highest use of the site. It should also test sales per seat, occupancy cost and labour, with coverage shown on the combined payments of the bank and development company loans. With so many approvals failing to close, the study should document permits, the liquor licence where it applies, and the construction budget, and the appraisal should be reconciled with the purchase price.