SBA 504 Restaurant Feasibility Study in Texas

Texas full-service restaurants under 504

The 504 program finances fixed assets alongside a first-mortgage lender, and in Texas it has been used heavily for sit-down restaurants. From FY2017 to FY2026 SBA approved 160 such loans worth $201.0 million, and full-service restaurant ranks 2 of 39 among the classes in Texas under this program. By loan count Texas stands 6th across the states for this class. What sets the cell apart from the class nationally is size: the median of $1.1 million is 1.77x the national 504 median, with the middle half running from $642,500 to $1.6 million. Franchise brands account for 14.4% of loans, so most borrowers here are independents.

Development companies and counties

In 504 the lender listed by SBA is the certified development company that holds the SBA-backed portion. Capital Certified Development Corporation leads with 61 loans worth $83.3 million, ahead of LiftFund, Inc. with 36 and $44.6 million. Greater East Texas Certified Development Company holds 16, North Texas Certified Development Corporation 13 and Community Certified Development Corporation 7. Harris County shows 18 loans and Travis 17, with Bexar at 12, Dallas and El Paso at 9 each and Denton at 8. This is a statewide spread rather than a Dallas and Houston story, and a sponsor outside the large metros will find precedent. The table is SBA's record of current holders only.

Floors for cancellation and charge-off

The cancellation floor is the distinguishing risk marker here. Post-approval cancellations are floored at 7.1% across the FY2017 to FY2024 approvals, and the ceiling rises to 12.7% once loans still undisbursed are treated as cancelled, a wide gap that shows how many projects were still in motion. Texas restaurant 504 loans that disbursed in the early cohort number 67, and a floor of 1.5% of them have gone to charge-off, with the figure within five years of approval landing on that same 1.5%. Annual volume has moved from 20 loans and $18.4 million in FY2017 to 11 and $12.1 million in FY2021, then 10 and $15.8 million in FY2026.

Proof the Texas file needs

For a Texas sit-down restaurant on 504 money, the study must prove the real estate case as much as the operating one, because the financing is tied to the property. It should test the trade area and daytime and evening demand, the competing concepts within a short drive, build-out or purchase cost against a ticket near $1.1 million, and sales at which the combined debt payment is covered with margin. Equity injection, the appraisal of the building and the owner-occupancy the program expects are discussed with the lender, not decided by a study. We state program rules in words only and cite no limit here that SBA's record does not show.