SBA 7(a) Liquor Store Feasibility Study in California

The charge-off record is the distinctive part

California's liquor stores under SBA 7(a) are numerous and large, but what most separates them from California lending overall, and from liquor stores in other states, is how few have defaulted. The record shows 1,189 loans for $713.0 million gross, with California ranked 1 in the country for this program and class, while liquor stores sit 4 of 39 among California asset classes. Among the 544 loans funded in FY2017 to FY2021, a mere 0.18% are charged off today, and the figure at five years is 0.18% as well. As floors they could still rise, but they are low enough to stand out. The $420,000 median is 0.95x the 7(a) norm for liquor stores nationally, and half of loans fall from $224,000 to $765,000.

Who lends and where

Five banks fill the lender table: Bank of Hope holds 164 loans worth $67.9 million, Open Bank 144 worth $114.4 million, PCB Bank 122 worth $88.6 million, American Continental Bank 87 worth $59.0 million and Hanmi Bank 83 worth $47.6 million. The figures are SBA's holder records, not a description of any bank's practices. Los Angeles County has 530 loans, then Orange 101, San Bernardino 81, San Diego 62, Alameda 55, Riverside 52, Sacramento 49, and Fresno and San Francisco 25 each, with Santa Clara at 24. Franchise share is 0.08%, so independent owners dominate.

Approvals and cancellations

Annual approvals have been steady for a class this large: 115 in FY2017, a low of 84 in FY2022, then 129 in FY2025 and 140 in FY2026. Cancellations are modest, with a cancellation floor of 10.1%, and the same 10.1% when undisbursed loans are counted as cancelled. The cancellation figures do not set California apart; the charge-off record does.

Testing a California liquor store

The license and the site come first, since ABC licensing and local conditional use rules decide whether the business can operate at all. Demand follows: households and incomes within convenient reach, existing licensed outlets, and the traffic past the door. Many of these loans finance a store changing hands, so the study should separate the price for goodwill and inventory from any real estate and test whether the seller's reported sales hold up. Against a median near $420,000, debt service coverage should be built on conservative gross margins and fair owner pay. The low charge-off record is encouraging, but it describes past borrowers, and each new borrower still has to show coverage under a weaker-sales case. An appraiser will value the business and the lease together.