Auto Dealership Feasibility Study, Weatherford, Texas: A New Franchised Store on an SBA 504 Loan

The trade area for this case is the City of Weatherford, with Parker County as the outer ring. Those are the geographies for which the Census Bureau publishes current estimates; the research found no primary radius or drive-time tabulation, and it found no daytime employment count. A dealership's customer base is wider than its town, because buyers cross-shop along I-20 toward Fort Worth, so the city figures understate reach and the county figures overstate loyalty.

The growth is real and recent. The city's 31.6% gain since 2020 is faster than the county's, which says new households are settling close to the I-20 frontage where the stores sit [1][2]. Mobility is high: 18.5% of Weatherford residents moved in the prior year, against 14% for Texas [3]. Newcomers are buyers without an established dealer relationship, which is the one demand feature a new store can actually capture. Weatherford College enrolled a record 7,242 students in fall 2025, up 9.7%, with 3,060 on the Weatherford campus [4]; students and their families add used-vehicle and service demand more than new-vehicle demand.

Income supports the price points a mainstream brand needs. Per capita income was $42,661 against $40,752 statewide, and the median age of 38 sits above the Texas median of 35.6 [3]. An older, higher-income household base buys more new vehicles and keeps them in a dealer's service lane longer. The margins of error on the city's ACS figures are wide (the income estimate carries plus or minus $9,025), so the lender should read them as direction, not precision.

The state backdrop favors volume. The average franchised store in Texas sold $108.401 million in 2025, against $76.603 million nationally [37]. Texas had 1,285 franchised dealerships at mid-2026 [38]. Nationally, light-duty new-vehicle sales reached 16,233,363 in 2025, with light trucks at 83.0% of the total [37], and the seasonally adjusted rate was 16.5 million in June 2026 [42]. Financing costs eased: the average new-vehicle loan rate was 6.35% in the second quarter of 2026, down from 6.79% a year earlier [38].

What the evidence cannot show is the number that a manufacturer and a lender would actually use: new-vehicle registrations in the area of responsibility and the brand's expected share of them. That is the standard way to size a franchised store, and neither the manufacturer's data nor any registration count was in the research. Vehicle-sales seasonality for this market was not found either. Both become lender conditions; until they are in the file, the unit volumes in the revenue build are assumptions anchored to the national average store, not to Weatherford.

The subject is a hypothetical site of about 5.0 acres with I-20 frontage in Weatherford, inside city limits. The land is priced at $18.00 per sq ft, a round planning assumption: no land sale for I-20 frontage in Weatherford was found, and an appraisal will set the value. Asking prices are not sales, and Weatherford's frontage is expensive for the region: a 4.58-acre I-10 frontage tract in Seguin was listed at $1,200,000 in October 2026 [5]. Land is one of the two largest lines in the budget, so an appraisal below the assumed level would cut the collateral cushion directly.

Zoning

The City of Weatherford's C2 Interstate Commercial district exists for commercial uses with a regionwide trade area along the I-20 corridor [6]. Vehicle sales in C2 have been approved by conditional use permit, not by right: two 2016 ordinances rezoned I-20 tracts to C2 with a conditional use permit for motor vehicle sales and rentals [7], and a Planning and Zoning Commission agenda carries the same combination for motor vehicle sales and storage [8]. A 2016 amendment, heard on December 7, 2016, set a separate parking standard for new and used auto dealers, though the ratio itself was not captured [9]. The state ties licensing to zoning: the dealer's premises checklist requires a zoning certificate that includes motor vehicle sales [11], and a new-vehicle store needs a general distinguishing number plus a franchised dealer license for each showroom location [10]. The district designation of any specific tract, the CUP timeline and its conditions were not found.

Utilities, access, flood and environment

The research found no named water, sewer, electric or gas provider for the tract, no FEMA flood zone or FIRM panel, no environmental report and no impact or connection fee schedule. It found no TxDOT count station at the site; TxDOT publishes its annual average daily traffic counts each July, with the current dataset published on July 22, 2024 [12], so the count is a pull, not a gap in the data. The exit number at the subject's interchange was not found. Each of these becomes a lender condition. For a dealership, the flood zone matters more than usual: a display lot holds millions of dollars of inventory at grade, and the floorplan lender will price that exposure.

Taxes

Inside city limits and Weatherford ISD, the 2025 rates are $0.392246 per $100 for the city, adopted September 9, 2025 [29], $1.0342 for the school district [30] and $0.285070 for Parker County [31]. Together that is $1.711516 per $100 before any emergency services district or junior college levy, neither of which was found. Parts and service carry the 8.25% local sales tax [32]; vehicles carry the 6.25% state motor vehicle sales tax, which the dealer collects and remits at titling [33]. Vehicle inventory is taxed through a unit property tax, and Parker County's 2025 unit factor for this city, school district and county combination is 0.001790 [48][34]. The model charges that factor against every vehicle sold, which treats the inventory tax as a cost to the dealer rather than an item passed to buyers.

Dealership expenses are best benchmarked against gross profit, because gross, not sales, pays for people and advertising. AutoNation's selling, general and administrative expense ran at 67.9% of gross profit in fiscal 2025 and 68.2% in fiscal 2024 [44]. The model uses that ratio as the stabilized level and starts above it: a new store hires its sales, F&I and service staff before volume arrives and spends heavily on launch advertising. The ratio is 70.0% in Year 3 and reaches the benchmark in Year 5. For scale, the average store paid $5.61 million of payroll to 65 employees in 2025 and spent $586,246 on advertising [37]; both sit inside this line.

Floorplan interest is a dealer's largest financing cost after its real estate, and the 504 cannot carry it. The model holds 51 days of new and used inventory, the market-wide new-vehicle supply in June 2026, at a 7.50% rate. Days' supply varies widely by brand, from 25 for Toyota to 93 for the Chrysler, Dodge, Jeep and Ram line in the same report [42], so the sponsor's actual brand matters here. No manufacturer floorplan assistance is counted.

Property tax is charged on land, building, site work and equipment at cost and the combined 2025 rate, because the research found no assessment ratio. The vehicle inventory tax runs on sales. Insurance is a placeholder until a broker quotes garage liability, property and open-lot coverage; wind, hail, flood and wildfire conditions were not found.

Total operating expense is $8,505,715 in Year 3, leaving net operating income before real estate debt of $1,909,952, a 2.6% margin on revenue. NADA's guide for net profit on sales is 4.00% [39], measured after occupancy cost. The model's lower margin before any real estate cost is a conservative stance for a start-up, not a forecast that the store will underperform its peers.

An SBA 504 loan splits a project three ways: Third Party Lender 50%, debenture 40%, borrower 10%; debenture 35% at a 15% contribution and 30% at 20% [54]. The split moves with the equity tier, and the tier depends on two facts about this borrower.

The first is age. The borrowing entity is a new business, two years old or less, so it needs 15% under SOP 50 10 8.1, effective October 1, 2026 [54]. The standard 10% is not available to it. The second is the property. SBA's special purpose list does not include dealerships, so a new dealership does not reach the 20% tier for a business that is both new and special purpose. The list does include service centers with pits and in-ground lifts [54]. This case specifies above-ground lifts for that reason, and the lender should get the CDC's reading of the actual service-department design in writing.

The debenture limit is $5 million. The higher $5.5 million limit is for small manufacturers, which a dealership is not. That limit is what breaks the sponsor's proposal: at the opening equity, the debenture would be $6,857,499. At the 15% tier alone the debenture would still sit above the limit, and the bank's first lien would have to carry the excess above its usual half of project cost. At the equity that coverage requires, the debenture is $5,000,000, at the program limit, and the bank's first lien is $8,570,492, 50.0% of project cost; any share above half is a credit decision for the bank, not something the 504 program grants.

The debenture carries a 25-year term, one of the 10, 20 or 25 years SBA allows, and the bank's term has a floor: 7 years for a 10-year debenture, 10 years for a 20- or 25-year debenture. The model amortizes the bank loan over 25 years. The debenture rate is 6.97%, the 25-year effective rate from the October 8, 2026 pricing, against a 5.85% debenture coupon [35]; the effective rate folds the ongoing program fees into the rate, so the model adds no separate annual fee. The rate is fixed only when the debenture is sold after construction, about a year from now, so it is a condition, not a fact. The upfront fee of 0.50% on the debenture is added to project cost, so the sponsor's equity share carries part of it [55]; the annual fee of 0.203% is among the ongoing fees inside the effective rate, and the lender should confirm the CDC's own pricing at closing. The bank rate is an assumption: Prime was 7.00% on the October 9, 2026 H.15 release [56], and the model uses 7.25% fixed.

Three eligibility points sit outside the numbers. Since March 1, 2026, every direct and indirect owner must be a U.S. citizen or national, under Policy Notice 5000-876441 issued February 2, 2026 [36]. SBA's 2025 SOP treated a new-vehicle dealer agreement as a franchise, so the agreement goes through franchise review and the brand must be on SBA's franchise directory [51]; the lender should confirm the same treatment under SOP 50 10 8.1. And the owner-occupied building must meet the 60% occupancy test for new construction [54]; a single-tenant dealership meets it easily. The lender does not need a feasibility study by rule: 13 CFR 120.160(b): SBA may require professional appraisals, a survey, or a feasibility study [57]. On a start-up with no operating history, the lender and CDC will still want an independent read of what the store must sell. Our note on what SOP 50 10 8.1 changed for feasibility studies covers where projections still carry weight, and the SBA 7(a) and 504 practice explains how we build them for a CDC file.

The 504 coverage floor is 1.15x [54]. SBA measures it on historical results where they exist; a new store has none, so the study tests the projection, and this case uses Year 2, the first full year after the launch.

As proposed. The sponsor's 10.0% injection fails the equity tier. It also pushes the debenture to $6,857,499, over the limit, and the resulting debt service of $1,323,532 is covered only 1.01x in Year 2. Any one of those failures stops the loan.

As restructured. The engine first lifts equity to the 15% tier and caps the debenture, which moves the excess onto the bank's first lien. That alone is not enough for Year 2 coverage, so equity rises again, to 20.8%, until coverage meets the floor at 1.15x. At that equity the debenture is $5,000,000, at the program limit, and the bank's first lien is 50.0% of project cost. Total debt falls to $13,570,492 with $1,166,297 of annual debt service. Coverage is 1.63x in Year 3 and 2.13x by Year 5.

Year 1 is the problem the ratio hides. Coverage of 0.40x means the store needs a reserve, funded at closing, sized to carry the gap between Year 1 income and debt service. That reserve is additional sponsor cash, and a lender could reasonably ask for it as a condition rather than lean on the restructured equity alone. The alternative is a sponsor guaranty backed by the cash flow of other stores, which turns the analysis into a global cash flow test outside this study.

The two drivers that matter most are new-vehicle volume and the expense ratio. Volume moves every department at once. The expense ratio is the sponsor's own lever, and it moves coverage faster than volume does: a 10% rise in the ratio takes Year 2 coverage below 1.00x even at the underwritten volume, while a 10% fall lifts it well clear of the floor. Across the grid, Year 2 coverage runs from 0.46x to 2.00x.

Two things follow for underwriting. The lender should test the sponsor's staffing plan and launch budget against the Year 1 and Year 2 ratios the model uses, because a start-up that staffs to the average store's 65 employees [37] in its first year would exceed them. And the volume test should come from the manufacturer's planning figures, not from this study's ramp.

• No award, no store. The research found no open line-make. If the sponsor's brand cannot be confirmed, the case does not exist; if the award comes with a smaller area of responsibility than the volume ramp implies, the Year 2 test fails.
• A mature row with deep incumbents. The three largest dealer owners carry more than $63.8 million of 2025 market value between them [22], and their buildings already meet current manufacturer standards. A new import store competes for the same cross-shoppers on Fort Worth Highway.
• Front-end gross is falling. New gross per unit fell 15.8% in a year in Haig's sample [42]. The model holds the lower figure flat; another year of compression would cut Year 2 gross before volume has built.
• Import costs. A 25% tariff on imported vehicles applied from April 3, 2025, and on listed parts from May 3, 2025 [53]. Depending on the brand, that can raise prices and shrink allocations, which matters more to a new store than to an incumbent with an established allocation history.
• Land priced at an asking level. The land price is an assumption at the 2026 asking level for I-20 frontage, not a sale. If the appraisal comes in lower, the first lien's loan-to-value rises, and the bank may ask for more equity at closing.
• Construction cost. The building price is a 2021 registry estimate plus an allowance. Input costs rose 8.9% in a single recent year [46]; a contractor's bid above the allowance comes straight out of the sponsor's equity.
• Special purpose reading. If the service department is built with in-ground lifts and the CDC reads it as a service center, the equity tier rises and the structure must be resized.
• Thin first year. Year 1 coverage of 0.40x needs a reserve. Without one, a single slow quarter could put the loan behind before the store reaches volume.
• Floorplan dependence. The store cannot operate without a floorplan line, which the 504 cannot finance. A floorplan lender that tightens advance rates or curtails the line in a downturn can starve the store of inventory regardless of its real estate coverage.

Other 504 cases on this site face different versions of the same structural questions. The Texas truck stop case shows a special purpose property where the higher equity tier applies, the Texas car wash case shows how a single-purpose building changes collateral, and the Texas RV and boat storage case shows a 504 project whose operating costs are far lower than a dealership's. Outside the 504 program, the Boerne assisted living and memory care case shows the same sizing logic under HUD Section 232, where coverage, not cost, sets the loan. Our special purpose property note sets out why that classification matters to a lender's recovery. The auto dealership hub covers subtypes beyond the franchised new-vehicle store, and the Texas market page and Dallas-Fort Worth page place Weatherford in its region.