SBA 7(a) Restaurant Feasibility Study in Tennessee

Tennessee restaurants: larger loans and a harder road to closing

In Tennessee, table-service restaurants rank second among the classes, and 7(a) has approved 279 of them across FY2017 to FY2026, worth $168.1 million, placing the state 25 among states. Two features set the cell apart. First, the ticket: restaurants here borrow at a median of $350,000, 1.42x the nationwide 7(a) benchmark, while the inner half of loans sits at $122,500 through $772,200. Second, cancellation, which reaches a floor of 16.3% of approvals through FY2024 and 18.4% when undisbursed loans are counted. Franchised units are 19.0% of loans.

Banks and counties

Pinnacle Bank holds 32 loans worth $32.1 million, a high average, while The Huntington National Bank has 27 worth $7.3 million and U.S. Bank, National Association has 26 worth only $1.1 million. Newtek Bank, National Association holds 18 worth $5.8 million and Old National Bank 13 worth $6.4 million. The wide spread in average ticket across holders is the practical lesson. These are holder entries from SBA and not lending policies. Davidson County has 63 loans, Shelby 52, Knox 25, Williamson 23, Hamilton 15, Montgomery 14, Blount and Rutherford 13 each, Wilson 8 and Maury 7.

Charge-offs from a small cohort

The cohort of loans funded in FY2017 to FY2021 is only 90, so the percentages move with a few failures: at least 7.8% charged off so far and 4.4% inside five years. Read them as floors drawn from a small group, and not as stable averages. Cancellations never enter the charge-off cohort, so the approvals that fell away before closing are a separate part of the risk picture.

Testing a Tennessee restaurant loan

With cancellation running high, begin by confirming the path to closing: signed lease or purchase contract, permits, and equipment quotes. Then model the covers per week, check rent and labor against comparable restaurants in the trade area, and set the total build-out against a median near $350,000. Tourism and event traffic can swing sales by month in parts of the state, so monthly cash flow matters more than an annual average, and the study should show a reserve that carries the slowest months. Show coverage at sales below plan. Under 7(a), a private bank makes the loan and SBA guarantees part; an appraisal will separate business value from any property pledged.