SBA 7(a) Grocery Store Feasibility Study in Wisconsin

Wisconsin grocers: Milwaukee and a market-by-market record

Wisconsin holds 73 grocery store loans under SBA 7(a), approved between FY2017 and FY2026, worth $47.3 million. Grocery stores are 14 of 39 among the asset classes in Wisconsin, and the state's rank among states is also 14. The median loan of $315,000 is 1.02x the nationwide ratio, so the typical Wisconsin store borrows the typical amount, and the interquartile range is $135,000 to $761,000. A franchise appears on 21.9% of loans. Nothing here clears our distinctness margin against both parents.

Small banks, one big county

Peoples State Bank holds 8 loans worth $3.2 million, and Nicolet National Bank 5 worth $3.0 million. Milwaukee County has 22 loans, well ahead of Marathon with 8 and Waukesha with 6, followed by Columbia with 5 and Dane with 4. Counties outside Milwaukee show small counts, so a lender should expect few local comparables for a store there. The yearly series is uneven, with 13 loans and $8.6 million in FY2021 and only 3 loans and $996,000 in FY2024.

Of Wisconsin grocery loans approved for FY2017 through FY2024, at least 8.1% was cancelled, and the ceiling matches. For the 38 loans that funded earlier, 2.6% is the write-off floor so far and 2.6% within five years. They are minimums, and open loans may add to them.

Testing a Wisconsin grocery request

The question for a Wisconsin study is whether a store can hold its share where large chains operate. It should identify the shopper: neighbourhood residents, a specialty or ethnic customer, or a rural town without another source of groceries. Competitor locations, store size and the product mix, particularly fresh and prepared food, determine sales per square foot. The budget needs inventory, refrigeration and point-of-sale equipment, and the lender should see a working-capital reserve for a thin first year. If the borrower is buying a going store, the study should test the seller's real sales and the supplier terms the buyer inherits, and the appraisal should separate real estate from business value. A lender will also want the study to state who owns the building and whether lease or purchase terms are fixed before closing. The sponsor's grocery experience, the wholesale supplier relationship and a plan for shrink and spoilage deserve their own treatment, since small stores lose margin to waste before they lose it to competition.