Use this checklist to assess businesses in this industry for SBA 7(a) lending and underwriting.

Labor + Owner Involvement

• Does the owner work full-time on the floor or at the register?
• Are family members involved without formal compensation?
• Has owner/operator labor been replaced with market wages?
• Is payroll adequate for full store coverage?

Margins + Shrinkage Review

• Are gross margins in line with grocery benchmarks (25–27%)?
• Is inventory spoilage, loss, or theft (shrink) accounted for?
• Are cost of goods sold accurately categorized by department?
• Are addbacks reversing expenses that should be recurring (e.g., utilities, repairs)?

Inventory and Asset Review

• Is inventory valued separately or included in goodwill?
• Are refrigeration systems, shelving, and registers appraised?
• Is CapEx realistic for equipment replacement cycles?
• Are there any leased or off-book assets impacting operations?

Red Flags

• Margins over 27% without explanation
• Owner/family labor not normalized
• Inventory lumped into goodwill
• Cash-heavy revenue with low COGS reported

SBA SOP Tip

Retail businesses must reflect realistic margins, labor coverage, and inventory valuation to support SBA-compliant fair market value conclusions.