SBA 7(a) Restaurant Feasibility Study

The deepest restaurant record SBA keeps

Over FY2017 to FY2026, full-service restaurants took 28,716 SBA 7(a) loans worth $14.04 billion, and with a record that large no headline figure is an outlier. The contrast is with 504. A 504 restaurant loan buys owned real estate; a 7(a) restaurant loan can also pay for a lease build-out, equipment, buying a business or working capital. The median 7(a) restaurant loan comes to $246,000, and the middle half runs from $74,000 to $575,000, smaller than the 504 restaurant figures throughout. Franchised concepts account for 10.5% of these loans.

Where restaurant losses show up

The charge-off record is the reason a lender treats this class with care. Across 12,099 restaurant loans funded in FY2017 to FY2021, at least 6.7% have been charged off, and 3.9% failed before their fifth anniversary; SBA can still add to both figures. Cancellation is ordinary, at 12.5% for restaurant approvals of FY2017 through FY2024, with a ceiling of 13.4%. The volume runs through a handful of banks. The Huntington National Bank alone holds 3,167 restaurant loans totalling $850.1 million, Newtek Bank, National Association 960 totalling $352.8 million, and Manufacturers and Traders Trust Company 893; TD Bank, National Association holds 867 and U.S. Bank, National Association 839. California has 3,776 loans, New York 2,050, Texas 1,991, Florida 1,600 and Ohio 1,532. Approvals fell from 3,566 in FY2017 to 1,932 in FY2021 and recovered to 3,574, worth $1.78 billion, in FY2025.

What a 7(a) restaurant study has to test

With losses at this level, a feasibility study for a 7(a) restaurant has to earn the lender's confidence on each of the following. Demand: the trade area's spending on eating out, the dayparts the concept serves, and the restaurants competing for the same diners, measured rather than assumed. Cost: the build-out, kitchen equipment and opening inventory, priced against bids, with the landlord's work and allowance pinned down in the lease. Debt service coverage: sales tested well below the operator's projection, with rent, payroll and food cost at realistic shares, since a restaurant that covers its debt only at forecast sales has no room for the losses this record shows. The appraisal: for a leasehold deal there is little real estate to fall back on, so the lender relies on the business value and the equipment, and the study should show both plainly. For an acquisition, the seller's tax returns and point-of-sale data have to agree with the forecast.