SBA 7(a) Restaurant Feasibility Study in Minnesota

Minnesota restaurants borrow less than their peers elsewhere

Minnesota logged 652 approvals for 7(a) full-service restaurants in FY2017 to FY2026, with $237.1 million in gross dollars, and ranks 14 among states. Restaurants are first among the 39 classes inside Minnesota. The median of $193,150 is 0.79x the nationwide 7(a) benchmark for table-service restaurants, and that median sets this cell apart from Minnesota's other classes and from the class nationally: Minnesota operators take smaller loans than their national counterparts, while the middle half starts at $75,000 and ends at $429,250. Franchised units account for 8.7% of loans, a minority of the file.

A mix of banks and community lenders

Sunrise Banks National Association tops the table with 72 loans worth $27.0 million. U.S. Bank, National Association follows with 35 loans and $4.0 million, BankVista with 34 and $12.8 million, Old National Bank with 31 and $11.0 million, and Northeast Entrepreneur Fund, Inc. with 30 and $3.6 million. Hennepin County has 207 loans, Ramsey 68, Dakota 40, Anoka 38, Saint Louis 37, Washington 31, Stearns 22, Carver 16, Wright 11 and Sherburne 10. SBA's holder entries show who holds or held each loan and no more.

Floors from the record

A cancellation floor of 9.0% applies to approvals through FY2024, or 10.3% counting undisbursed loans as cancelled. Charge-offs among the 329 funded loans of FY2017 to FY2021 are at least 4.3% to date and 2.7% within five years. These rates are minimums, because open loans can still be lost.

Testing a Minnesota restaurant request

Seasonality deserves attention: the study should model monthly sales and show that the cash reserve carries the slowest months. It should compare rent, labor and food cost with what comparable operators in the trade area achieve, test whether the equipment and renovation budget fits a ticket near $193,150, and examine the competition within a short drive. Rerun the coverage test with sales under plan. Since the lender is a private bank carrying an SBA guarantee, an appraisal usually addresses business value and any pledged real estate.

Sunrise Banks National Association leads the lender table and Northeast Entrepreneur Fund, Inc. sits fifth.