SBA 7(a) Restaurant Feasibility Study in Ohio

Ohio table service: first by class, small by ticket

Full-service restaurants are the first-ranked asset class in Ohio, and the 7(a) program has put 1,532 approvals into them between FY2017 and FY2026, worth $396.3 million in gross dollars. Among states Ohio places 5 for this program and class. Ticket size is small: the median is $75,000, only 0.30x the national 7(a) median for table-service restaurants, and loans cluster between $50,000 and $314,125.

Who holds the paper

The lender table is concentrated. The Huntington National Bank holds 993 loans worth $179.6 million, far ahead of KeyBank National Association with 66 loans and $26.4 million. U.S. Bank, National Association has 36 loans, Fifth Third Bank 32 loans worth $17.4 million, and Peoples Bank 32 worth $7.2 million. Treat the table as SBA's bookkeeping of who holds or held each loan; it reveals nothing about any bank's standards. Franchised concepts make up 14.0% of loans. Franklin County leads with 234 loans and Cuyahoga follows with 224; Hamilton has 135, Summit 96, Lucas 75, Stark 53, Delaware 48, Mahoning 43, Lake 41 and Montgomery 40.

Floors for cancellation and charge-off

Cancellation after approval touches at least 11.5% of approvals made through FY2024, and 13.5% once undisbursed loans are counted as cancelled. On charge-offs, the base is 737 loans that funded during FY2017 through FY2021, and at least 6.4% of them have been written off so far, with 3.5% lost inside five years of approval. Loans not yet closed out may yet fail, so every one of these percentages is a minimum, and lenders should not read them as settled outcomes.

Testing an Ohio restaurant loan

A study should measure the covers a location can serve at its seat count and turn rate, set against the trade area's other restaurants and the rent the operator will carry. It should test food and labor cost on a realistic menu, the equipment and renovation budget compared with a ticket near $75,000, and the working capital needed through a slow opening. Debt service coverage should hold in a downside where sales trail the plan. Because 7(a) is a general-purpose guaranteed loan made by a private lender, the appraisal usually concerns business value and any real estate offered as collateral.