SBA 504 Restaurant Feasibility Study in Washington

A real-estate-sized restaurant program

Under 504, Washington restaurants borrow at a scale the 7(a) program rarely reaches. Sixty loans, $41.9 million. The midpoint loan is $608,500, exactly 1.00x the nation's 504 full-service midpoint, so Washington matches the country on size, and the middle half sits in a tight band from $397,500 to $845,000. Washington's 504 restaurant count ranks 19 against other states, but full-service restaurant is 2 of 39 inside Washington's own mix, so restaurants are among the two places where the state's 504 money goes. Franchises make up 6.7% of loans.

Development companies and counties

On the 504 side, the names are certified development companies. Evergreen Business Capital: 21 loans, $14.1 million. Northwest Business Development Association: 20 loans, $14.4 million. Ameritrust CDC: 16 loans, $11.8 million. SBA lists the current holder, which can differ from the company that packaged the deal, and the table does not describe what any company asks of a borrower. King County has 13 loans, Pierce 9, Skagit 8, Snohomish 6 and Spokane 5, so the program reaches well beyond the Seattle area.

Outcomes, with the limits

For FY2017 to FY2024 approvals, cancellation reaches at least 11.5%, and treating every still-undisbursed loan as dead leaves the ceiling at 11.5% as well. The charged-off cohort is 30 loans funded in FY2017 to FY2021. Its charged-off share to date is 0.00% as a floor, and so is the five-year measure. A cohort that size is thin and young, and open loans can still default, so this is an early floor, not evidence that Washington restaurants never fail under this program.

What the study must test

Because 504 funds fixed assets, the study is first an argument that the site and building deserve long-term financing. Test the trade area against dining demand: daytime and evening population, traffic at the site, and the concept's place among nearby full-service rivals. Itemise build-out and kitchen equipment, with a contingency for permitting and utility upgrades. Show a stabilised sales case and a slower first year, and hold the combined bank and development-company payment against both. The class is full-service dining, so a fast-casual concept should not borrow these figures. Real estate value if the restaurant closed is what lenders under this program concentrate on, so the appraisal must carry it.