SBA 7(a) Liquor Store Feasibility Study in Michigan

Cancellations set this cell apart

Michigan's liquor store loans under SBA 7(a) are cancelled more often than the class generally: at least 16.3% of FY2017 to FY2024 approvals, or 17.9% once never-disbursed loans count as cancelled. That cancellation floor is the distinctive metric. The program approved 386 loans from FY2017 to FY2026 worth $248.6 million in gross dollars, Michigan ranks sixth among states by count, and liquor stores place third of 39 within Michigan's classes. Its median loan, $495,500, is 1.13x the class median elsewhere, and the central half spans $90,025 to $985,250.

Holders and geography

The Huntington National Bank holds 124 loans worth $30.9 million. First Internet Bank of Indiana holds 56 worth $70.8 million, a far greater sum per loan. Fifth Third Bank holds 32 worth $8.2 million, United FCU 23 worth $24.0 million and Byline Bank 20 worth $24.0 million. SBA lists the present holder, not the originator and not the bank's practices. Franchising is almost absent at 0.78%. Wayne County has 168 loans, far ahead of Oakland with 51 and Macomb with 39, so lending is concentrated in the Detroit area. Approvals ranged from 24 in FY2020 to 51 in FY2025.

Funded loans have fared better

Of the 146 funded loans in the cohort, 2.7% were written off to date and 0.68% in the first five years from approval. Open loans may still fail, so neither figure is closed. The gap between the high cancellation floor and the low charge-off floor suggests that the risk in this class lies in whether a plan closes, more than in what happens after it does.

What a Michigan liquor store study must test

The program permits a business purchase, inventory, equipment or improvements, so the study should name the use. For liquor, licensing comes first: the type of licence, its availability and its transfer conditions, because a deal can fall apart when a licence does not move. The study should test sales per store against rent and inventory cost, the trade area's households, competing stores and grocers that sell alcohol, and shrink. To address the cancellation record, it should document the seller's financial records, the lease assignment and the licence transfer before any commitment. Loan payment coverage should be tested against a drop in sales, and the appraisal will value the going concern, treating inventory separately.