SBA 7(a) Cold Storage Feasibility Study

The 7(a) cold storage record

SBA's 7(a) program approved 49 cold storage loans in FY2017 through FY2026, worth $66.1 million. The median 7(a) refrigerated storage loan is $615,000, and half of the loans spread from $175,000 to $2.3 million, wide enough to take in equipment and working capital at one end and whole facilities at the other. Cancellations are the other feature. The floor for cold storage approvals of FY2017 to FY2024 is 20.9%, and the ceiling is the same 20.9%.

A scattered lender list and no loss rate

The lender list is scattered. California leads with 14 loans; Ohio, Texas and Puerto Rico have 5 apiece and Florida 4. Annual approvals never rise far: 10 loans and $7.6 million in FY2020, 5 loans and $14.4 million in FY2018, 3 loans and $5.1 million in FY2026. Loan Analytics keeps the cold storage loss figure back, since too few loans reached funding in its cohort; the page prints no number for it. The franchise share is 0.00%.

What a 7(a) cold storage study should test

Given the 20.9% cancellation floor, a borrower needs a plan for an approval that never funds. Whether the project is a new facility or the purchase of an operating one needs stating up front, since the two carry different risks and need different evidence. A study has to show who will use the space: processors, distributors and growers, the lease or throughput terms they will sign, and the seasonal swing in their volume. For an operating facility bought with 7(a), it has to verify utilization, contract history and the condition of compressors, evaporators and insulated panels, since a refrigeration plant near the end of its life is a cost the buyer inherits. For a new build, cost has to cover the plant, frost-protected floors, docks, backup power and the utility service. Coverage should be tested at higher energy cost, lower occupancy and a higher floating rate together. The appraisal will find few comparables, so the study should state the building's value as dry warehouse space, the figure a lender can recover if the cold chain business fails.