SBA 7(a) Restaurant Feasibility Study in Iowa

A small-ticket cell with a real loss floor

Iowa's table-service restaurants borrow far less under SBA 7(a) than peers elsewhere: a median of $173,900 is 0.71x the national figure. Between FY2017 and FY2026 the program approved 219 loans worth $62.7 million in gross dollars, with $84,000 to $350,000 covering the central half. Iowa ranks 32nd among states for the program, yet restaurants top the list of 39 asset classes at home. Franchise units account for 9.6% of the loans.

Outcomes

Of the 99 loans funded by FY2021, 6.1% are charged off to date and 5.1% by the fifth year after approval. Cancellations were at least 9.8% of Iowa approvals through FY2024, and 10.3% when loans never disbursed are included. Open loans may still add to these floors. The cell is small and the cohort smaller, so a failure or two moves the percentages.

Lenders and counties

Lincoln Savings Bank holds 21 loans worth $7.8 million. Farmers State Bank holds 13 worth $3.9 million, United Bank of Iowa 11 worth $1.5 million and Bankers Trust Company 9 worth $1.1 million, while U.S. Bank, National Association holds 14 worth only $572,900, a notably small amount per loan. The table shows holders, not policies. Polk County has 52 loans, well ahead of Linn with 20, Black Hawk with 16, and Scott and Story with 13 each. Approvals peaked at 33 in FY2021 and eased to 15 by FY2026.

Proof an Iowa restaurant needs

A median this low suggests many Iowa borrowers are buying a going restaurant or equipping leased space, and the study should set the price beside sales that can be documented, not projected. It should test covers and turns against rent, the labour supply in a tight market, and the other restaurants in a trade area that may be a single small city. Outside Polk County the market is thin, and the study should say how far customers will travel. Seasonal swings and the weekday lunch trade deserve their own lines. Show payment coverage with cautious covers per day, because the charge-off floor shows that thin margins catch owners. Appraisers will compare earnings with price, so goodwill must be explained.