SBA 7(a) Flex Space Feasibility Study in Minnesota

A class that nearly stops after FY2023

Minnesota's SBA 7(a) record for flex, office and retail investor buildings has an unusual shape: it simply ends. Loans approved ran from 3 in FY2017 to 16 in FY2021, then 12 in FY2022 and 8 in FY2023, and the table shows 0 loans and $0 in each of FY2024, FY2025 and FY2026. In total the state logged 62 loans and $31.3 million, XX the program-and-class table, while the class itself sits at 15 of 39 inside Minnesota. A study written today cannot assume the recent market looks like the cohort that built the totals.

Why the lessor note matters here

In SBA's coding, flex buildings sit in one lessor bucket with office and retail, and the same industry code is shared with banquet hall rental. Our reading is that the class describes investor-owned buildings rented to tenants, and that a lessor of this kind is the fact the data records, not the tenant's trade. SBA's data for lessors of this kind nearly stops from FY2024; therefore a borrower should not read the empty recent years as proof that demand or lenders vanished; the break may lie in the records. The figures describe SBA approvals only.

Size, geography and lenders

The median loan is $348,500, only 0.58x what the class posts across the nation, and that ratio is what makes Minnesota distinctive: these are small buildings by national standards. The middle half of loans runs from $138,750 to $716,300. Hennepin County leads with 12 loans, followed by Anoka and Washington with 4 each, and Dakota, Kandiyohi, Sherburne and Stearns with 3 each, which shows a statewide spread rather than a single metro. One lender is listed for the program, holding 8 loans worth $3.6 million as SBA currently reports the holder; it is a record of loans held, not a view of how that lender judges new requests. Franchising barely registers, at 1.6% of loans.

Outcomes and the study that should follow

For Minnesota flex buildings approved through FY2024, the cancellation floor is 21.0%, while the ceiling that also writes off undisbursed approvals comes out identical at 21.0%. Of the 33 loans disbursed by the FY2021 cutoff, no loan has been charged off so far (0.00%), and the five-year measure reads 0.00% as well. Both stay floors, since loans still open might yet default. A feasibility study for a Minnesota flex building has to test absorption of the specific tenant mix, rent against the cost to carry, and the stabilised net operating income that must cover the payment with room to spare. It must also show a lease-up case without an anchor tenant, and the appraisal should be run on the income the building can truly earn, since small flex buildings are priced by what their rent rolls support.