SBA 7(a) Restaurant Feasibility Study in Alabama

The smaller market with the highest charge-off floor

Alabama full-service restaurants financed through SBA 7(a) show a plain pattern: restaurants are the first-ranked class among 39 in Alabama, yet the state is only 31 nationally for the program and class. The files for FY2017 to FY2026 hold 222 loans, $121.6 million gross, with a median of $276,500, which is 1.12x the national median, and typical loans from $103,750 to $624,100. Franchise brands hold 19.4%. Its charge-off record deserves attention: of 84 loans funded in FY2017 to FY2021, 11.9% are charged off to date, and 7.1% were charged off within five years.

Banks and counties

Newtek Bank, National Association has 23 loans worth $10.2 million. PNC Bank, National Association has 22 worth $10.1 million, The Huntington National Bank 17 worth $9.4 million, Northeast Bank 11 worth $2.6 million, and ServisFirst Bank 7 worth $4.6 million. The source is the holder SBA lists for each loan, which describes the books, not policy. Jefferson County, around Birmingham, has 55 loans, Madison 26, Baldwin 24, Mobile 16, Tuscaloosa 14, Lee 13, Shelby 9, Montgomery 8, Houston 6 and Cullman 4. Volume fell to 6 in FY2020 and rose to 43 in FY2025.

Cancellation

The cancellation floor is 10.6% for FY2017 to FY2024 approvals, and 11.8% if loans still undisbursed are counted as cancelled. The charge-off figures are floors too, since open loans can still fail.

What an Alabama restaurant study has to test

The charge-off record tells a lender to read a restaurant plan skeptically, and the study should answer what could go wrong. Begin with the concept and the site: daytime and evening traffic, the number of competing full-service restaurants in the corridor, and incomes in the trade area. Next is the cost of opening against a median of $276,500, including build-out, kitchen equipment, licensing, opening inventory and a working-capital reserve for the first months. Labor and food costs belong in the base case. Coverage should be shown at sales below plan, with the owner's pay included. Most of a restaurant's value is the business, so the appraiser will weigh the lease and the track record.