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

A franchise-led program in a second-ranked class

Limited-service restaurants are the second-largest asset class in Kentucky's SBA lending, placing 2 of 39, yet the 7(a) program's volume here is modest by national standards: the state ranks 30 among states for loans of this kind. Between FY2017 and FY2026 SBA approved 167 loans under the 7(a) program for these quick-service projects, totalling $80.2 million in gross dollars. Franchised units account for 59.3% of the loans, so a large share of Kentucky borrowers arrive with a brand, a prototype building and a franchisor's own operating model already in hand.

Loan size and who funds it

The median loan is $275,000, a ratio of 0.93x to the 7(a) national median for quick-service restaurants, so Kentucky borrowers sit close to the national norm rather than above or below it. The middle half of approvals runs from $85,000 to $560,000. Community Trust Bank, Inc. holds 18 of the loans worth $3.0 million, The Huntington National Bank 14 worth $3.4 million, and Stock Yards Bank & Trust Company 13 worth $2.4 million. U.S. Bank, National Association holds 10, and Republic Bank & Trust Company holds 6 loans that total $9.0 million, a much larger average per loan than the other lenders listed. Those tallies come from SBA's listing of whoever holds each note now, and they do not describe any bank's appetite. Geographically the loans cluster in Jefferson County with 48, followed by Kenton with 15, Fayette with 14 and Boone with 10.

Cancellations, charge-offs and the calendar

Attrition before disbursement is visible in Kentucky quick-service lending: the cancellation floor is 12.0% across the FY2017 to FY2024 window, and the figure climbs to 12.8% should the undisbursed remainder also fall away. Kentucky's funded quick-service loans show the loss side as follows: of 67 disbursed in the FY2017 to FY2021 cohort, 6.0% are already charged off, with 6.0% again at the five-year mark. Neither figure is final, since loans still open may yet default. Approvals have been uneven: 5 loans in FY2020 against 24 in FY2021, with 21 in FY2025 and 13 in FY2026, a complete fiscal year, which cautions against projecting any single year forward.

What a Kentucky study for a 7(a) quick-service loan must test

A feasibility study here begins with the franchise question, since most comparable borrowers carry one. It should confirm that the franchisor's required build-out, equipment package and royalty structure produce a break-even sales volume the trade area can plausibly deliver, and it should count competing drive-through units along the same corridor rather than in the metro as a whole. Coverage of the debt payment ought to be tested at the small end of the observed range and at the large end, because a project financed near $560,000 carries a very different cushion from one near $85,000. The appraisal needs a defensible value for the real estate, or for the leasehold improvements if the site is leased, and the study should say which. Finally, the cancellation and charge-off floors above are a reminder that a lender will look hard at the sponsor's liquidity, so the study should show working capital through the opening ramp and not just the construction budget.