SBA Feasibility Study Consultants for 7(a) and 504 Loans

An SBA feasibility study is an independent analysis of whether a proposed project can generate the cash flow needed to repay an SBA-guaranteed loan. It defines the trade area, sizes demand, surveys competing supply, tests the project cost, builds the pro forma and stresses it, and concludes with a debt service coverage ratio the lender can put in its credit memorandum.

SBA regulations do not require a feasibility study on every loan. Under 13 CFR 120.160(b), SBA "may require" a feasibility study, and SOP 50 10 8.1 sets no preparer credential or content standard for one. The decision sits with the lender and, on 504 loans, the Certified Development Company. In practice they ask for one wherever repayment rests on projections rather than history: start-ups, ground-up construction, special-purpose property, franchise units, and acquisitions where the buyer will not continue the seller's operations. The 7(a) credit standard requires the lender to show repayment from business cash flow, and the study is the document that supports that showing when the business does not yet exist.

MMCG's analysis of SBA 504 loan data for fiscal 2025 shows why these cases matter. Start-ups accounted for 14% of all 504 approvals, but 33% of hotel approvals, 43% of car wash approvals, 41% of RV park approvals and 69% of self-storage approvals. Every one of those files was underwritten on a projection.

SOP 50 10 8.1 with Technical Policy Updates, issued by SBA Information Notice 5000-882227 on September 25, 2026, took effect on October 1, 2026 and replaced SOP 50 10 8. SBA has stated that it governs 7(a) and 504 applications received on or after that date; the August version of the notice referred to loans assigned an SBA loan number on or after that date, so confirm with your lender which version your file runs under.

The changes that affect feasibility work cluster around projections.

Appendix 15 sorts every change of ownership into one of four categories: Initial Acquisition, Business Expansion, Owner Buyout, and ESOP or Cooperative. Initial Acquisitions, Owner Buyouts and ESOP transactions must show 1.25x coverage on historical results, measured on the last fiscal year or a two-year average. Business Expansions by an existing operator must show 1.15x. Post-closing projections no longer satisfy that floor on their own.

Two exceptions keep projections in play. Where the loan finances owner-occupied special-purpose property and the collateral fully secures it, the lender may rely on projections. Where the buyer will not continue the seller's operations, the lender may underwrite the transaction as a start-up and apply start-up requirements. Both cases call for a feasibility study.

An independent Quality of Earnings report is required on acquisitions with a business purchase price of $3 million or more. The business portion of an acquisition loan amortizes over 10 years, and the full loan may run 25 years when the acquisition includes owner-occupied special-purpose real estate whose value depends on the business. Education, advisory and agent fees no longer count toward the equity injection.

For 504 loans, the technical updates removed the minimum term on the third-party lender's first mortgage and allow a 25-year maturity across the 504 structure when real estate is 51% or more of project cost.

MMCG's SOP 50 10 8.1 analysis covers the full rule set. The summary above is what matters for the study.

SBA 7(a) is the agency's general business loan program, with loans up to $5 million. In fiscal 2025 SBA guaranteed about 77,600 7(a) loans for $37 billion. 7(a) Small loans of $350,000 or less are underwritten on a 1.10x coverage floor on a historical or projected basis; Standard 7(a) loans above $350,000 require 1.15x, and acquisitions follow the Appendix 15 floors above.

A 7(a) feasibility study centers on the borrower's total debt service capacity. It addresses management experience, demand within the defined trade area, existing and announced competition, revenue mix and pricing power, the ramp from opening to stabilization, the operating cost structure, and the sensitivity of coverage to volume, price and labor cost. It closes with an explicit global debt service coverage calculation covering the proposed SBA loan, existing senior debt and any subordinated obligations.

The SBA 7(a) feasibility study page covers the program in detail, including acquisition underwriting under Appendix 15 and start-up treatment. Sponsors can model debt service and guaranty fees in advance with MMCG's SBA loan calculator.

SBA 504 is the agency's commercial real estate and major equipment program, delivered through a Certified Development Company and a senior bank lender. The standard structure is 50/40/10: the bank holds a 50% first mortgage, the CDC debenture funds 40%, and the borrower contributes 10%. The debenture is limited to $5 million per borrower, or $5.5 million per project for small manufacturers and energy projects. Since July 4, 2026 a borrower who obtains a 7(a) loan first may combine up to $5 million of 7(a) and up to $5 million of 504 financing.

MMCG's analysis of SBA 504 loan data shows that in fiscal 2025 SBA approved about 6,600 504 loans with $7.6 billion in debentures, supporting $18.3 billion of total project debt once third-party first mortgages are counted. Hotels led every industry by debenture dollars, with 368 approvals and $1.0 billion in debentures, an average debenture of $2.7 million. Special-purpose property types made up 12% of 504 approvals but 21% of debenture dollars.

A 504 feasibility study covers everything a 7(a) study covers plus three layers driven by CDC review. First, economic development: the project must create or retain one job per $95,000 of debenture, or $150,000 for small manufacturers and energy projects, or qualify under one of SBA's community development or public policy goals. Fiscal 2025 504 approvals reported roughly one job per $98,000 of debenture. Second, the senior bank's conventional credit committee, which typically applies stabilized coverage floors of 1.20x to 1.35x and loan-to-value caps of 65% to 80% to its first mortgage. Third, the borrower contribution, which rises to 15% or 20% in the cases described below.

The SBA 504 feasibility study page covers the CDC review process, debenture terms and the economic development tests in detail.

Under 13 CFR 120.910 the 504 borrower contribution rises from 10% to 15% when the project involves a limited or single-purpose building, to 15% when the business has operated for two years or less, and to 20% when both apply. The 504 test is functional: a property is limited-purpose because its layout, construction or design restricts its use, not because of its appearance.

Property types that lenders and CDCs commonly treat as special-purpose include hotels and motels, gas stations and convenience stores, car washes, campgrounds and RV parks, assisted living and nursing facilities, surgery and urgent care centers, bowling alleys, funeral homes with crematoriums, cold storage with more than 50% refrigerated area, golf courses and marinas. Self-storage, fitness, breweries and veterinary hospitals are decided case by case on the facility design.

Special-purpose classification carries three consequences for the study. The higher contribution and the going-concern appraisal both depend on the business, so the study must demonstrate that the business supports the real estate. The CDC and the senior bank expect an alternative-use analysis showing residual value if the as-designed use fails. And under SOP 50 10 8.1, special-purpose collateral that fully secures the loan is one of the two cases where projections may carry an acquisition, which places the study at the center of the credit decision.

MMCG flags potential special-purpose classification at the scoping stage so the contribution, the appraisal scope and the study scope are settled before the file is submitted.

Business acquisitions are now the most structured use case under SOP 50 10 8.1. The study addresses the historical performance of the target, the quality of earnings after one-time items and owner add-backs, the post-acquisition projection under new ownership, the buyer's industry experience and the integration risk. Seller debt counts toward the 10% equity injection only when it is on full standby for the entire loan term, and standby debt together with other limited sources may supply no more than half of the required injection.

Franchise units must belong to a brand listed on the SBA Franchise Directory, which SBA reinstated with SOP 50 10 8 and carried into 8.1. Listing confirms eligibility, not unit-level feasibility. The study confirms unit economics against the Franchise Disclosure Document, including royalty and advertising fund structure, territory protection where granted, and the financial performance representations in Item 19 where the franchisor makes them.

Start-ups face the heaviest documentation load. Lenders ask for a business plan, a 10-year or longer projection, and monthly cash flow through the later of 12 months or three months past breakeven. The study supplies the market validation, competitive analysis, ramp curve and management assessment that stand in for an operating history, and demonstrates cash runway at months 12, 18 and 24.

Every study is delivered as one report organized into four feasibility dimensions, which track the components bank regulators expect a credible feasibility analysis to cover: budget, pro forma, site, demographics and market supply and demand, with sensitivity testing.

Economic feasibility covers the project site: labor availability, zoning, entitlements and utilities, road, rail and air access, required site area, FEMA flood zone exposure, seismic and wind hazard exposure, and the regulatory path to completion. It also quantifies job creation for 504 review, and for special-purpose property it evaluates the site for its intended use and for the alternative use that supports the highest-and-best-use determination.

Market feasibility defines the trade area by drive-time isochrone and demographic overlay, sizes demand from peer benchmark data, estimates potential gross revenue and market penetration from pricing, rates per unit, occupancy or utilization and unit mix, projects absorbable demand, and surveys existing, planned and under-construction competitors within the competitive set.

Technical and cost feasibility reconciles the subject project cost against the Marshall & Swift replacement cost guide and against the net present value conclusion from the discounted cash flow analysis, and addresses construction phasing, equipment specifications and any specialized improvements that affect depreciation under special-purpose treatment.

Financial feasibility contains the pro forma and the financial analysis: a 10-year projection calibrated to market-indicated operating expenses; net present value and internal rate of return on a leveraged and unleveraged basis across 3-, 5-, 7- and 10-year holds; debt service coverage for each projection year; return on equity; and a sensitivity analysis that stresses occupancy and revenue at 5%, 10%, 15% and 20% below base case, with break-even analysis and NPV, IRR, DSCR and ROE recalculated at break-even. The report closes with a global debt service coverage reconciliation and a feasibility determination reconciled to SOP 50 10 8.1 and 13 CFR 120.160.

The method is set out in full in MMCG's feasibility study methodology.

MMCG has produced SBA feasibility studies across every major asset class that qualifies for 7(a) or 504 financing. Each page below carries the asset's cost structure, revenue model, ramp curve and lender expectations, together with the SBA treatment that applies to it.

Hotels and motels: 504's largest industry by dollars. Special-purpose. Brand, PIP and RevPAR ramp drive the study.

Gas stations and convenience stores: Special-purpose. Fuel margin, inside sales and a Phase I environmental assessment regardless of loan size.

Truck stops and travel centers: Special-purpose. Diesel volume, fleet mix and corridor freight demand.

Car washes: Special-purpose. Membership penetration, churn and the car-count ramp to breakeven.

RV parks and campgrounds: Commonly special-purpose. More than half of gross income must come from guests staying 30 days or less.

Self-storage: Eligible when the owner operates the facility and controls access. Lease-up curve and supply pipeline.

Assisted living and memory care: Special-purpose. State licensing, a 12- to 24-month occupancy ramp and payer mix.

Medical, surgery and dental facilities: Surgery and urgent care centers are commonly special-purpose. Payer mix, licensing and case volume ramp.

Gyms and sports facilities: Case by case. Membership churn, Franchise Directory status and equipment life against loan term.

Restaurants and food service: Franchise Directory status, occupancy cost and ramp. The highest loan counts and among the highest loss rates in the SBA portfolio.

Child care and early education: Licensing, capacity, enrollment ramp and subsidy share.

Funeral homes and crematoriums: Special-purpose with a crematorium. Call volume and the shift to cremation.

Wineries, breweries and distilleries: Wineries are commonly special-purpose. TTB licensing, taproom versus distribution mix and inventory aging.

Cold storage and specialized industrial: Special-purpose above 50% refrigerated area. Energy cost and tenant concentration.

Veterinary and pet care: Case by case. Practice valuation, DVM retention and specialty demand radius.

Bowling and family entertainment: Special-purpose. Revenue mix across lanes, food and beverage and events.

Multifamily: Not SBA-eligible as passive real estate. MMCG's multifamily practice covers conventional, USDA and HUD financing.

Engagements are led by Michal Mohelsky, J.D., FMVA, Principal of MMCG Invest and a Practicing Affiliate of the Appraisal Institute, with the firm's senior analysts. Studies are prepared under USPAP competency, scope of work and reporting discipline, using fundamental market analysis that forecasts subject-specific demand, supply, absorption and capture rather than inferred trend analysis.

No SBA regulation sets a credential or independence standard for feasibility study preparers. Lenders and CDCs set that expectation themselves, and bank regulators are explicit that a study commissioned by the borrower may be biased and must be critically reviewed. MMCG's position in every engagement is the same: the firm does not arrange financing, does not receive referral fees from lenders, does not write business plans for the borrower, and does not adjust conclusions to fit a predetermined outcome. Fees are fixed and never contingent on approval. The result is a study a credit committee can rely on and a file that holds up when SBA reviews it.

That last point matters more than it used to. SBA's Inspector General found in 2026 that SBA made final decisions on 16 of 32 sampled guaranty purchases without sufficient supporting evidence, and repayment-ability analysis is the recurring failure in every OIG review of defaulted 7(a) loans. A study that documents its assumptions is what turns a projection into evidence.

MMCG prices SBA feasibility studies on a fixed-fee basis with no hourly billing. Single-site 7(a) business acquisitions, franchise units and smaller commercial real estate projects run $4,900 to $8,500. SBA 504 general-purpose owner-occupied real estate runs $6,500 to $12,000. SBA 504 special-purpose property, including hotels, gas stations, car washes, RV parks, gyms, surgery and dialysis centers, dental and veterinary specialty, funeral homes, wineries, breweries, distilleries and cold storage, runs $7,500 to $18,000 depending on complexity. Multi-site portfolios are priced on a tiered basis with per-site reductions. Hospital-scale, multi-specialty medical, USDA Community Facilities and other institutionally complex transactions run $15,000 to $40,000.

Standard delivery is 9 to 16 business days for single-site studies, with special-purpose 504 and multi-site work toward the upper end of that range. Expedited delivery from 5 business days is available at a premium. Payment is 50% at engagement and 50% at delivery. Lender-requested clarifications during the SBA approval window are made at no additional charge, under the written acceptance guarantee MMCG has offered on every study since founding.

Proposals are returned within 12 business hours from the firm's San Francisco office at 27 Maiden Lane, Suite 625. Engagements are managed remotely nationwide, with site visits where project complexity warrants.

Request an SBA feasibility study proposal: info@mmcginvest.com, (628) 225-1110.