SBA 504 Warehouse Feasibility Study

Public warehouse operators under 504

This record is narrower than its name. The warehouse class covers public warehousing only: a manufacturer or distributor that buys its own warehouse is coded to its own industry, not here. Within that scope, the 504 program approved 193 warehouse loans from FY2017 to FY2026, worth $346.6 million. Their median is what stands out. At $1.3 million, the 504 warehouse median is far above the warehousing median across both SBA programs, and on our margin test it also stands apart from the median for every 504 class at once. The middle half of 504 warehouse loans lies between $634,000 and $2.8 million, the price range of a working distribution building, often with land for trailers and docks.

How 504 warehouse deals have fared

Cancellation is the bigger exposure. At least 14.7% of warehouse approvals from FY2017 to FY2024 did not fund, and the share could reach 19.9% if the approvals still undisbursed also cancel. Funded loans have done better: the 82 warehouse loans disbursed in FY2017 to FY2021 carry a 1.2% charge-off floor, and 0.00% failed in their first five years, so the losses recorded came later in the loan. The lender table is spread thin. Trenton Business Assistance Corporation holds 11 warehouse loans worth $30.4 million, and WBD, Inc. and Florida First Capital Finance Corporation, Inc. match that count at $18.6 million and $15.2 million, with The Mortgage Capital Development Corporation at 9 and Empire State Certified Development Corporation at 8. California has 33 loans, Florida 14, Wisconsin 12, and Missouri and Texas 11 each. Franchised operators are rare at 2.6%. FY2021 brought 27 loans worth $50.8 million, and FY2026 recorded 20 worth $47.1 million.

Proving a public warehouse can carry 504 debt

A warehousing business lives on its customers, so a feasibility study has to start with them: the contracts, their length and renewal history, how much revenue comes from the largest account, and whether the space is leased by the pallet, by the square foot or under dedicated contracts. Demand for added space means the shippers in the region, vacancy in competing warehouse stock and the highway and port access that draws freight. Cost covers the building, clear height, docks and doors, racking, sprinklers and yard paving, priced against bids. The bank loan and CDC debenture together should stay covered with the largest customer gone, since one lost account can open a hole in a warehouse operator's revenue. The appraisal will treat the building as industrial space, which usually resells more readily than a special-purpose building, and the study should support both the operator's income and the building's value to another user, which is the lender's real protection.