SBA 7(a) Flex Space Feasibility Study in California

A class whose lending nearly stopped

The nonresidential lessor class covers flex, office and retail investor buildings, and by loan count California had the biggest SBA 7(a) book of any state, ranked 1. From FY2017 to FY2026 the program approved 218 such loans worth $299.7 million, but the series ends abruptly: 44 loans in FY2022, 28 in FY2023, then only 6 in FY2024 and nothing recorded for FY2025 or FY2026. That follows the FY2024 note the page carries, under which lending to investor lessors nearly stops from that year. A reader should therefore treat these loans as a record of an earlier period, not a live flow.

Large tickets

At $1.1 million the median is 1.83x what lessors nationally get under 7(a), and it was the measure our test picked out. Half the loans fall between $600,200 and $1.9 million. Franchise brands account for 4.1%, and the class is 20 of 39 among California asset classes, a modest position. Cancellations reach 17.9% of approvals through FY2024, unchanged by whether undisbursed loans are added. Across 109 funded loans in the matured cohort nothing is charged off so far (0.00%) and nothing inside five years (0.00%), which are floors that loans still open could raise.

Lenders and geography

Enterprise Bank & Trust has 36 loans worth $46.0 million, 32 loans at $41.5 million sit with Wells Fargo Bank National Association, Harvest Small Business Finance, LLC 29 loans and $47.4 million, U.S. Bank, National Association 16 worth $31.4 million and East West Bank 9 worth $13.1 million. These are the current holders SBA reports, and nothing here describes their policies. Los Angeles County has 75 loans, Orange 20, San Diego 17, Riverside 15, Alameda 14 and San Bernardino 12. Lessors of offices, shops and banquet halls are filed under the identical entry, so a flex building cannot be isolated.

What a study of this kind must now consider

Anyone planning a California flex or small-commercial building should recognise that the 7(a) route this record documents has narrowed, and the study should state which financing is assumed. It must test absorption in the submarket, rents per square foot, vacancy and tenant mix, tenant improvement and leasing costs, and the cost to build or buy against a loan near $1.1 million. Coverage of debt service must be demonstrated once the building is full and again through a slow fill. An appraiser will capitalise net operating income, so every rent assumption needs a comparable. The past lending data are useful as context for sizes and places, not as evidence that a similar request will be approved.