SBA 7(a) Liquor Store Feasibility Study in New Jersey

Liquor stores take third place among New Jersey asset classes, 3 of 39, and for 7(a) volume the state stands at 4 among its peers. The program approved 448 loans for $440.6 million between FY2017 and FY2026. Notes are large: the $742,500 median is 1.69x what 7(a) liquor borrowers nationwide hold at median, and $295,000 to $1.3 million spans the middle half. Franchising is nearly absent at 1.8%, so these are independent license holders buying or refinancing established stores, often with real estate attached.

What sets the cell apart: cancellations and tiny losses

Two measures distinguish this program view. Cancellation is high: 18.4% or so, as a minimum, of New Jersey's FY2017 to FY2024 liquor approvals fell through, rising to 18.7% when undisbursed loans are included, well above many classes. Charge-offs, meanwhile, are very low: in the FY2017 to FY2021 cohort of 205 disbursed loans, charge-offs stand at 0.49% to date and at the same 0.49% within five years. A lender can read this as a class where a deal often fails to close but a funded loan rarely fails, although open loans may still change the picture, and a rate that low rests on a small number of loans.

Lenders and counties

Fulton Bank, National Association holds 75 loans, worth $116.2 million. TD Bank, National Association has 49 worth $18.0 million, Peapack Private Bank and Trust 45 worth $46.5 million, Provident Bank 36 worth $42.3 million, while Wilmington Savings Fund Society FSB, at 19 loans and $23.6 million, ranks fifth. These are SBA records of holders, not statements about lending practice. BERGEN County has 58 loans, MIDDLESEX 51, CAMDEN 48 and HUDSON 37, followed by MERCER 30. The series peaked at 66 loans and $63.3 million in FY2021 and has since moved between 29 and 49 loans a year.

What a New Jersey liquor store study has to test

A study must start with the license, because in New Jersey a retail license is limited and its price and transferability shape the deal. It should then test sales history of the store being acquired, the margin the product mix supports, and competing stores and chains within the trade area. The high cancellation floor suggests that financing often falls through before closing, so timelines for license transfer, due diligence and appraisal belong in the plan. The loan payment must still be covered if sales fall short of the seller's figures, and the appraisal must separate real estate, license and inventory. Program terms are SBA's; this page states none.