SBA 7(a) Quick Service Restaurant Feasibility Study in Alabama

Limited-service restaurants come second among Alabama's asset classes, 2 of 39, although the state ranks only 29 for 7(a) lending to them. SBA approved 188 loans worth $105.8 million from FY2017 to FY2026. A $399,650 median is 1.35x the nationwide 7(a) median for these restaurants, and the middle half spans $205,875 to $670,925. Franchise flags mark 59.6% of loans, a clear majority. So an Alabama borrower in this program is usually a franchisee taking a note bigger than a typical counterpart elsewhere.

Lenders and counties

United Community Bank holds 14 loans worth $10.5 million. Live Oak Banking Company has 11 loans carrying $10.7 million, Sabre Finance the same count but only $1.9 million, The Huntington National Bank 9 carrying $3.1 million, and BankFirst Financial Services 8 carrying $4.0 million. SBA reports the holder of record and no more. JEFFERSON County has 47 loans, MADISON 22, BALDWIN 14, TUSCALOOSA 12, and MOBILE and MONTGOMERY 11 each, so Birmingham, Huntsville and the Gulf coast lead.

Recent growth and the loss floors

Approvals were between 11 and 18 a year from FY2017 to FY2023, then jumped to 31 in both FY2024 and FY2025, bringing $21.2 million and $20.8 million. Of FY2017 to FY2024 approvals, 12.2% at the least were cancelled, with the same 12.2% on the wider count. Charge-offs among the 68 loans funded in FY2017 to FY2021 reach 8.8% to date, though only 2.9% came within five years of approval, a gap that suggests losses arrive late. Open loans may add to both floors.

What an Alabama quick-service study should test

The core question is whether a franchise unit will reach the sales its brand requires on a larger note. The study should map traffic counts, drive-through queue capacity, competitors on the same corridor, and daytime population, and set the franchise fee, required build-out and royalty against projected sales. The late charge-offs imply that borrowers who pass the first years can still run into trouble, so the plan should include renovation reserves and a downturn case. Debt service coverage should hold at sales below the brand's average unit volume. An appraisal should value any real estate for a general restaurant user. Program rules come from SBA.