SBA 504 Restaurant Feasibility Study in Michigan

Michigan restaurants under the 504 program

Under SBA 504 a bank loan is paired with a debenture through a certified development company, a structure aimed at real estate and heavy equipment. In Michigan the full-service restaurant class is first among the 39 classes in the SBA 504 file. The record covers 98 loans approved from FY2017 to FY2026 and $59.2 million in gross dollars, and Michigan is 11th nationally by count for 504 lending to the class. The median loan is $468,000, a ratio of 0.77x set against 504 restaurant lending elsewhere; the central half of loans lies between $255,250 and $718,500. Franchise brands are on only 4.1% of loans.

Two development companies carry the book

The lender table for 504 lists development companies as the holders SBA reports. Michigan Certified Development Corporation holds 55 loans and $31.2 million, and Great Lakes Commercial Finance holds 37 loans and $26.0 million, so two names account for most of the loans listed. Oakland County has 11 loans, Macomb 10, Wayne 9, and Grand Traverse and Kent 8 each, which ties the record to the Detroit suburbs, the Grand Rapids area and the northern tourist region. Year to year the count went from 14 in FY2017 to 11 in FY2025, with only 1 loan worth $487,000 in FY2026, so the latest year is thin.

Cancellation, charge-off and what they mean

Cancellation hit at least 15.1% of Michigan's 504 restaurant approvals across FY2017 to FY2024, and 20.9% when undisbursed loans are counted as cancelled, so a meaningful share of approvals never reached funding. For the 44 loans in the seasoned cohort, the charge-off floor is 2.3% to date and 0.00% inside five years, which means the loss in that group came late. Treat both as minimums drawn from a modest cohort.

What a feasibility study for a Michigan 504 restaurant has to test

Because this program finances property and equipment, a study must treat the real estate as seriously as the restaurant. Is the site one a second restaurant operator would lease if this one failed? What is the land and building worth apart from the business? The sales forecast needs covers per day from the trade area, seasonal swings that affect Michigan's northern counties especially, and competition in the corridor. The study must show cost against a typical loan of $468,000 and say what the owner contributes. Coverage has to hold with two payments, one on the bank loan and one on the debenture, and with food and labor costs moved against the plan. The 504 restaurant grouping in Michigan has no coding caveat on file.