SBA 7(a) Warehouse Feasibility Study

A 7(a) median that stands apart

Unlike most 7(a) classes on this site, warehousing shows a 7(a) figure distinct from both parents, and it is the median. Public warehousing operators drew 536 loans from the 7(a) program over FY2017 to FY2026, worth $451.4 million, at a median of $350,000. That sits well below the warehousing median across both SBA programs, which large 504 building loans pull up, and our test also separates it from the median for 7(a) as a whole. Half of the 7(a) warehouse loans fall between $143,750 and $1.0 million, sizes that fit equipment, trucks, working capital and leased space more than a building purchase. The class covers public warehousing only; a business that warehouses its own goods is coded to its own industry.

Cancellations, losses and lenders

Warehouse approvals in 7(a) cancel often: the floor for FY2017 to FY2024 is 16.3%, among the higher cancellation floors in 7(a), and the ceiling is 18.0%. Of 203 warehouse loans that funded in FY2017 to FY2021, at least 3.4% were later charged off, but only 0.49% within five years, so most of the recorded losses came late. Franchised operators account for 4.3%. The Huntington National Bank holds 35 warehouse loans worth $22.7 million and TD Bank, National Association 22 worth $6.6 million, while Bank Five Nine and Northeast Bank have 20 each, worth $32.1 million and $8.2 million, and U.S. Bank, National Association 19. California has 83 loans, New Jersey 41, Texas 39, Florida 36, New York 32 and Ohio 29. Annual approvals held between 34 and 69 across the period, with 68 in FY2021 and again in FY2024, and FY2026 brought 56 loans worth $56.7 million.

What a 7(a) warehousing study has to test

Because loans of this size mostly finance an operating business rather than its building, the feasibility study has to test the business. That means customer contracts and how long they run, revenue concentration in the largest shippers, pricing per pallet or per square foot against competing third-party warehouses, and the labor and equipment needed to handle the volume. For an acquisition, the study should confirm that customer relationships transfer with the company. Where the loan does buy or expand a building, cost has to cover clear height, docks, racking, sprinklers and paving, and demand has to rest on regional freight and vacancy in competing space. Coverage should be tested with the largest customer lost and at a higher floating rate, which matters in a class where so many approvals cancel. The appraisal must separate equipment and business value from any real estate, since a leased operation leaves the lender little hard collateral.