SBA 7(a) Grocery Store Feasibility Study

Grocery loans with a heavy loss record

Grocery stores account for 3,701 SBA 7(a) approvals over FY2017 to FY2026, worth $2.75 billion. The loss record is the number a lender will notice. A 7.6% charge-off floor across 1,519 funded grocery loans of FY2017 to FY2021 is the loss figure to read, and 3.8% of those grocery loans failed inside five years. Cancellation is 12.5% for grocery approvals of FY2017 to FY2024, 13.1% at its ceiling.

Small stores, big banks, California and New York

The median 7(a) grocery loan is $310,000, and half fall between $100,000 and $972,000. Franchise brands account for only 3.0%. The Huntington National Bank holds 241 grocery loans worth $92.4 million and TD Bank, National Association 181 worth $33.3 million; U.S. Bank, National Association has 125, and Bank of Hope and Manufacturers and Traders Trust Company 119 each, with Bank of Hope's worth $123.9 million. California leads with 637 loans and New York follows closely with 524, far ahead of Michigan at 176, Texas at 170, Ohio at 169 and Illinois at 154. Approvals dipped to 288 in FY2020, reached $407.4 million in FY2021, and recorded 429 loans in both FY2023 and FY2025.

What a 7(a) grocery study must prove

The study has to show that the store's sales cover its debt with room for a bad year. For an acquisition, that means rebuilding sales from register data rather than tax returns alone, testing gross margin by department, checking inventory counts and shrink, and confirming that the lease, the supplier terms and any lottery, alcohol or benefit program authorizations will transfer. For a new or expanded store, demand means the households in the trade area, their spending on food at home, and the chains, discounters and dollar stores competing for them, including any new store announced nearby. Cost covers refrigeration, shelving, point-of-sale systems and opening inventory. A grocery coverage test should cut sales below the seller's best year and lift the floating rate. The appraisal will lean mainly on business value, equipment and inventory, and the study should test what that value would be worth with a chain store opened nearby, because new competition is a risk the study can measure before the loan closes.