SBA 7(a) Restaurant Feasibility Study in Maryland

The cancellation floor is the story

Maryland's full-service restaurants hold 445 SBA 7(a) loans and $216.4 million from FY2017 to FY2026, a book in which restaurants rank 1 of 39 among Maryland classes while the state ranks 19 for the program. The median loan, $225,000, is 0.91x of the figure for the same loans elsewhere, so Maryland is not a place of unusually large or small deals. What stands out instead is the cancellation floor of 16.9% for FY2017 to FY2024 approvals, 17.2% when undisbursed loans count, a notably high share of approvals that never closed.

Concentration in one lender

Manufacturers and Traders Trust Company holds 175 loans worth $32.0 million, many times its nearest peer. Northeast Bank has 23 worth $5.0 million, Newtek Bank, National Association 18 worth $7.5 million, Readycap Lending, LLC 15 worth $7.6 million and Fulton Bank, National Association 13 worth $10.0 million. The page repeats SBA's note that every loan sits with its present holder, so this shows books. By county, Montgomery has 95 loans, Baltimore City 80, Anne Arundel 42, Baltimore 41, Howard 40, Prince Georges 34 and Frederick 30.

Charge-offs and franchise share

Of 147 loans in the FY2017 to FY2021 cohort, 6.1% are charged off to date and 3.4% within five years of approval. Franchise loans are 10.1%, and the central half of all loans runs from $60,000 to $500,000.

Years

Counts slid from 53 in FY2018 to 18 in FY2021, then rebuilt to 65 loans in FY2026 with $45.8 million, the biggest dollar figure of any year shown. A reader should note that a recovery in volume has not erased the cancellation problem.

Testing a Maryland restaurant

A Maryland restaurant study should test the dining room's draw in a market where the Baltimore and Washington suburbs overlap, the cost of occupancy in the county chosen, and the staffing needed to open the doors. Given a cancellation floor this high, it should also show that the deal can close: lease signed, permits obtainable, equipment priced, and the owner's equity in hand. Coverage should hold with sales under plan, and an appraiser should price the going concern apart from any real estate the loan buys.