Restaurants - A Successful SBA Niche

A recent article in the Wall Street Journal points out a fact that I have noticed in my work with small businesses of all types: restaurants are not necessarily high risk endeavors. Yes, restaurants have many fixed costs and regulations to deal with, as the article points out, but overall they are no more likely to default on an SBA loan than many other businesses. So just what is it about restaurants that make them so popular with lenders?

Restaurants of all types received nearly 60,000 loans over the past decade worth over $13 billion.

As Emily Maltby explains in her article (“Are Restaurants Really Risky Business?”), restaurants of all types (including full-service and limited-service eateries) received nearly 60,000 loans over the past decade worth over $13 billion. The $8.15 billion loaned to full-service restaurants was only slightly behind the $8.25 billion the hotel industry picked up during that same period. She also points out that “restaurants are the second-largest private industry in the U.S., after health care.”

One of the more interesting facts in Maltby’s article is that, in spite of the acknowledged and perceived risks of restaurants, the charge-off rate for the category is only 4.4% compared to women’s clothing stores at 12% or 14% for nail salons. Out of 1128 different industries that received SBA loans during the period studied (October 1, 2000, to September 30, 2010), full service restaurants ranked 408 and limited service restaurants ranked 204 in charge offs.

So what does this all mean for restaurants? From what I have seen, while restaurants have many challenges, the people who open them have a certain level of dedication that can see them through. Perhaps all of those challenges mean that restaurant owners have to be that much more prepared to bring their dreams to fruition. And once those challenges are met, restaurants have great rewards for their owners. An example of this is East Village Tavern & Bowl in downtown San Diego which received an SBA loan to help it get off the ground. You can learn more about this successful restaurant in the information video on this site. In my next post I will go into more detail about restaurants and what I like about them.

If you are thinking about opening or expanding a restaurant and would like to see if an SBA loan could help, please contact me and we can set up a time to discuss your needs and plans. With over 30 years of experience in the lending industry I can advise you on the steps you need to take to prepare to submit an application for an SBA loan, and then help you through the process. Feel free to contact me through this site.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.