SBA 7(a) Restaurant Feasibility Study in Pennsylvania

Lighter loans than the national 7(a) restaurant

Pennsylvania full-service restaurants are a book of 1,076 loans under the 7(a) program across FY2017 and FY2026, with $496.7 million in gross dollars. Restaurants lead the state's asset classes at 1 of 39, and Pennsylvania ranks 9 among states for this program and class by loan count. The median loan, $200,000, is 0.81x of the 7(a) median for full-service restaurants nationally, and the central half of the loans sits between $50,000 and $550,200. The low end of that band shows how many awards are small refinancings, equipment purchases and working-capital loans for existing dining rooms. Franchise loans are 7.2%, a modest branded presence.

Lenders and counties of the book

Five lenders appear in the table. By count, The Huntington National Bank is first with 173 loans carrying $37.0 million, then TD Bank, National Association with 83 carrying $21.2 million; Manufacturers and Traders Trust Company holds 72 worth $12.7 million; Wilmington Savings Fund Society FSB has 57 loans totalling $53.7 million, and KeyBank National Association has 47 totalling $20.5 million. The dollar figure for Wilmington Savings Fund Society, much larger per loan than its peers, is worth a look. SBA places each loan with its current holder, so these are holdings. By county, Allegheny has 196 loans, Philadelphia 151, Montgomery 85, Bucks 63 and Delaware 44, with Chester, Lackawanna, Westmoreland, Luzerne and York behind.

What the cohort floors say

Of FY2017 to FY2024 approvals, 12.7% or more were cancelled after approval, and 13.7% if loans still undisbursed were counted too. Among the 471 loans that disbursed in FY2017 to FY2021, 3.6% have been charged off so far and 1.5% did so within five years. The program has not yet finished testing these loans, so a lender or a borrower should read all four numbers as lower bounds.

The shape of demand

Approvals fell from 157 loans in FY2017 to 58 in FY2020 and rebuilt to 123 by FY2025, and FY2026 dollars reached $63.2 million on 104 loans.

Testing a 7(a) restaurant plan in Pennsylvania

The study for a Pennsylvania dining room funded by 7(a) should test seats and sales per seat against neighbouring restaurants in the same trade area, the occupancy cost per square foot, and wage and food costs that move with the season. Because most loans in this record are modest, a request far above $550,200 needs its own justification, such as a building purchase or a full conversion. The program is flexible about use of proceeds, so the study should name what the money buys. Coverage should hold at sales below plan, and a change of ownership should be tied to the seller's actual records rather than to projected revenue.