SBA loans for fabric, quilt, yarn and needlework shops

A retail code where buyers do the borrowing

NAICS 459130 covers stores that sell fabric by the yard, quilting cottons and notions, yarn and knitting supplies, and needlework and cross-stitch materials. Many also sell and service sewing machines, rent time on longarm quilting machines, and teach. From FY2024 through June 2026 they took 107 SBA 7(a) loans worth $29,111,500 from 55 lenders.

The share of acquisitions is the story. Twenty-one loans, 19.6% of the total, financed a change of ownership, nearly twice the national share of 10.4%. The median acquisition loan was $467,700 at 10%, more than four times the industry's overall median. The pattern fits an industry of founder-owned shops: when the founder retires, the successor is often a long-time customer or employee rather than a competitor, buying a business whose value is mostly goodwill. An SBA loan is often the only bank financing that will carry that goodwill.

The wide middle half, from $50,000 to $400,000, reflects the two kinds of borrower: owners and start-ups borrowing modest sums for inventory and fit-out, and buyers financing a purchase. No loans went to franchises; this is an industry of independent shops.

What a lender sees in a fabric or yarn shop

A lender will want revenue broken out by source, because the sources differ in margin and in how well they would survive a change of owner.

Classes and clubs matter more than their share of revenue suggests. They bring customers back every week and sell fabric and yarn alongside them. But if the owner teaches most of them, a buyer's lender will treat that revenue as at risk until the buyer shows who will teach after closing.

Inventory: the biggest asset and the weakest collateral

A fabric or yarn shop's largest asset is usually its stock: thousands of bolts, skeins and patterns, some of it bought years ago. To a lender it is weak collateral. Inventory typically advances at up to 85% of net orderly liquidation value, or roughly half of cost, and for fashion-driven fabric that has sat on the shelf, liquidation value can be well under half. A lender will not lend on inventory at what the owner paid for it.

That matters most in a purchase. A seller often expects to be paid for inventory at cost on top of the price for the business. The buyer's lender will want a physical count near closing, an aging of what has not sold, and an agreement on how old stock is valued. The pages on working capital at close and inventory advance rates set out the mechanics.

Before signing a letter of intent, agree how inventory will be counted and valued at closing. Left open, it becomes a late surprise in a shop purchase.

Buying a shop from its founder

In a shop where the founder has taught, advised and known every regular for years, the customers are loyal to a person as much as a store. Lenders know it, and they look for a transition plan. In a complete change of ownership the seller may not stay on as an owner, officer or employee, but may consult for up to 12 months (up to 24 months under SOP 50 10 8.1 from 1 October 2026). A written consulting agreement that keeps the founder teaching a class or attending the shop's events for the first months helps. See SBA seller transition and buying from a retiring owner.

The financing follows SBA's purchase rules. The buyer puts in at least 10% of total project costs. A seller note can count for up to half of that only if it is on full standby, with no principal or interest payments, for the life of the SBA loan. SBA prohibits an earnout to the seller. Where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation, and the loan for the purchase cannot exceed it.

Two agreements often need the counterparty's consent. The store lease must be assigned or replaced, and a sewing machine dealer agreement may not pass to a new owner automatically. Raise both early; see lease assignment and change-of-control consents. From 1 October 2026 a change of ownership must also show 1.25x debt service coverage on historical results, and the loan amortizes over no more than 10 years except any real estate share.

Start-ups, Express loans and the building

Start-ups took 21.5% of loans, and 38.3% of loans went through SBA Express, which goes up to $500,000 with a 50% guaranty. A new shop's file rests on the owner's experience, often years working in or teaching at another shop, a realistic inventory budget and a location with a lease long enough to outlast the loan. For a start-up SBA requires an equity injection of at least 10% of total project costs.

Few owners in this industry buy their buildings. There were 6 SBA 504 projects, with a median of $310,000. Where the shop occupies at least 51% of an existing building, 504 is worth comparing against folding the real estate into a 7(a) loan; see 7(a) against 504.

Preparing a shop's file

Transparent works from its SBA checklist: two to three years of business and personal tax returns, a P&L and balance sheet with a year-to-date P&L, a debt schedule, and a personal financial statement for each owner of 20% or more, each of whom guarantees the loan. For a fabric, quilt or yarn shop, add:

• Revenue split by product sales, machine sales and service, classes, longarm services and online sales.
• An inventory report with an aging of slow-moving stock.
• The store lease, and any sewing machine dealer agreement.
• A list of classes and who teaches them.
• For a purchase, the letter of intent, the target's latest full year of figures and the proposed inventory valuation method.

Once the documents are in, Transparent builds the full lender package in a day and places it with SBA lenders in its book that finance small retail purchases. For comparison, see hobby, toy and game retailers and gift and souvenir retailers.