Beauty Salon Feasibility Study

A usable series from FY1999

Read the early rows with care. FY1991 to FY1994 are not measured for salons at all, FY1995 to FY1997 each show 1 loan under 7(a), and FY1998 shows 41 with the dollars withheld. The note under the table accounts for the thin years: when coding gaps in SBA's records pass the note's tolerance, the salon count for that year is a minimum, and when coding is too sparse the year is dropped from measurement. The series becomes readable in FY1999, with 357 7(a) salon loans for $37.2 million and 18 under 504 for $3.6 million. Any long-run trend a salon study quotes should start there rather than in FY1991, or it will mistake a gap in coding for a gap in lending.

The FY2007 peak and the fall that followed

From FY1999 the 7(a) count climbed almost without a break: 683 loans in FY2001, 1,218 in FY2003, 1,707 in FY2005 and 1,767 in FY2007, the highest count in the table. Then it fell away, to 1,225 in FY2008 and 575 in FY2009, when salon dollars dropped to $62.5 million, the lowest since FY2000. No year since has approved as many salon loans as FY2008; FY2025, at 1,192, comes closest. Salon credit has contracted hard in a downturn before, so a projection that assumes bookings rise steadily year after year ignores the record. The study's downside case should model a genuine contraction in bookings, not a token trim to the base case.

Fewer loans carrying more money

Dollars and count parted ways after the crash. FY2007's 1,767 loans totaled $150.3 million; FY2019's 767 totaled $175.1 million. In FY2020 and FY2021 the count sank to 556 and 552, the lowest since FY2000, yet the dollars held at $136.3 million and $136.2 million, close to FY2016's $137.2 million on 928 loans. The whole table carries the shift: FY2017 to FY2026 accounts for 8,281 of the 25,262 7(a) salon loans since FY1991 but $1.67 billion of the $3.42 billion. Salon loans in the recent decade run far larger than in the FY2000s, so a study should not assume a salon loan is still the small credit it was in the FY2000s; it has to support a loan amount on the scale lenders approve today.

The largest vintages are not yet measured

The recent cycle runs from a low of 552 approvals in FY2021 through 651 in FY2022 and 840 in FY2023 to 1,097 in FY2024 and 1,192 in FY2025, the record dollar year at $216.7 million, before easing to 816 loans and $191.1 million in FY2026. The charge-off floor on this page measures loans disbursed from FY2017 to FY2021, the years when salon volume was falling. Neither the FY2024 nor the FY2025 vintage is in it, and in FY2026 the dollars fell far less than the count. The loans being made now are newer than the loans whose losses can be measured, so a lender cannot read today's salon risk off the 8.0% floor alone; it reads it off the study's downside case.

504 rises when 7(a) falls

The 504 line keeps its own rhythm. It reached 84 loans and $25.4 million in FY2007, the year 7(a) peaked, then sank to 24 loans and $4.8 million in FY2014 while 7(a) approved 773. Its record came in FY2022, 85 loans and $27.1 million, a year when 7(a) had barely left its low; from FY2020 to FY2022 504 rose through 46, 64 and 85 loans while 7(a) stayed near the bottom. As 7(a) surged to 1,192 in FY2025, 504 eased through 58 and 63 to 53. Across the full record 504 holds 1,321 salon loans and $411.8 million, of which FY2017 to FY2026 alone holds 551 loans and $196.6 million. The pattern suggests that salons able to buy their premises turned to 504 when 7(a) salon credit tightened, which makes the property case and the appraisal as central to a 504 salon study as the operating projection.

New York-Newark-Jersey City leads, on small loans

The New York-Newark-Jersey City metro has 665 salon loans and $125.3 million, more loans than Florida or New York State and fewer only than California and Texas. Its median is $50,000 and its charge-off floor 10.7%. Boston-Cambridge-Newton is second with 342 loans; Los Angeles-Long Beach-Anaheim, third with 322, carries $87.0 million to Boston's $51.8 million, on a $138,300 median against $60,000. Boston's 342, set beside Massachusetts's 389 statewide, show how much of that state's salon lending runs through one metro, even allowing for the metro's New Hampshire side. The metros at the top of the count are small-ticket Northeast markets, and a study there is judged against a typical loan of $50,000 to $60,000.

Houston and Los Angeles: large loans, the highest floors

Houston-Pasadena-The Woodlands (17.6%) and Los Angeles-Long Beach-Anaheim (17.5%) carry the highest charge-off floors in the metro table, on medians of $199,800 and $138,300, and both sit above their states, Texas at 12.4% and California at 14.7%. Houston's 222 loans total $63.5 million. Dallas-Fort Worth-Arlington lends at a similar size, $187,500 across 264 loans and $74.4 million, yet shows 12.1%, close to the Texas figure, and San Francisco-Oakland-Fremont shows 13.3% at $150,000. Large tickets and high floors coincide in Houston and Los Angeles, but Dallas shows that size alone does not set the loss rate. A lender in either high-floor metro will want salon revenue anchored in chairs it can see filled, not in a projected book.

Low floors in Chicago, Boston and Minneapolis

Several large metros sit under the class's 7(a) floor of 8.0%: Chicago-Naperville-Elgin at 5.4% on 298 loans, Boston-Cambridge-Newton at 5.9%, Minneapolis-St. Paul-Bloomington at 6.3% on 188 loans and Philadelphia-Camden-Wilmington at 7.4% on 227. Their loan sizes differ widely, from Boston's $60,000 and Philadelphia's $75,000 to Chicago's $117,000 and Minneapolis's $131,750, so the low floors are not a small-loan effect either. Chicago's $69.0 million and Minneapolis's $44.8 million make them mid-size books by dollars. A low local floor helps a borrower only if the study shows that the new salon resembles the loans behind that floor in size, format and market.

Columbus and the Ohio pattern

Columbus, OH stands out within Ohio. Its 113 loans total $16.5 million at a $50,000 median, and its charge-off floor is 15.0%, against 7.0% for Ohio as a whole and 10.7% for the New York metro at the same median. Cleveland (110 loans, $17.6 million), Cincinnati (96, $15.0 million), Akron (42) and Toledo (28) all lend between $49,250 and $51,200, and their floors are withheld. Every Ohio metro listed lends at about the state's $50,000 median, so the small ticket is an Ohio pattern rather than a big-city one. A Columbus salon study cannot rely on the statewide floor and should test the loan against the metro's own record.

Splits inside Florida and California

Florida's metros split by loan size. Miami-Fort Lauderdale-West Palm Beach lends at a $55,000 median across 238 loans, with a 9.1% floor; Tampa-St. Petersburg-Clearwater lends at $227,000 and Orlando-Kissimmee-Sanford at $243,000, and Tampa's 111 loans carry $37.7 million against Miami's $49.9 million on 238. Jacksonville sits between them at $146,500. California divides the same way: Riverside-San Bernardino-Ontario lends at $50,100, against $138,300 in Los Angeles, $135,000 in San Jose-Sunnyvale-Santa Clara and $150,000 in San Francisco and Sacramento. Florida's state median of $120,000 describes neither Miami nor Tampa. A lender sets a salon request beside its metro's own figures whenever the table has them, and the study should draw that comparison before any other.

The largest metro medians

The biggest typical salon loans are in the South: Nashville-Davidson--Murfreesboro--Franklin at $255,800 on 44 loans, Raleigh-Cary at $249,150, Orlando at $243,000, Tampa at $227,000, Austin-Round Rock-San Marcos and Louisville/Jefferson County at $200,000, and San Antonio-New Braunfels at $195,000. Within North Carolina, Raleigh runs far above Charlotte-Concord-Gastonia's $146,900. The smallest is Buffalo-Cheektowaga at $40,000, with Rochester at $50,000, while Albany-Schenectady-Troy lends at $108,000 in the same state. San Juan-Bayamón-Caguas, PR records 55 loans and $5.7 million at $77,100, and Banco Popular de Puerto Rico appears among the lenders with 28 loans and $2.5 million. Most of these metros have withheld floors, so the loss question cannot be answered from the table; in a Nashville or Raleigh study the build-out budget and the ramp carry the weight a measured loss rate would otherwise carry.

Most loans are small; most dollars are not

Of the 8,281 7(a) salon loans, 5,472 are $150,000 or less, yet that band holds only $314.0 million of the $1.67 billion. The band just under the million-dollar mark holds the most money, $548.3 million on 970 loans, and the 1,620 loans of the band below it hold $407.9 million. Past the million-dollar mark, 160 loans carry $220.4 million, more than the whole 504 salon book of $196.6 million, and 59 more in the band above carry $177.9 million. The band past the table's top threshold records 0 loans and $0 under both programs. A lender's salon exposure is shaped by its larger loans even though most approvals are small, and a large request is judged against that thin upper tail, where the study has to justify every assumption.

Where 504 begins

The 7(a) quartiles run from $30,000 to $239,500 around the $87,000 median, and loans at the lower quartile or below more often fund equipment or working capital than a build-out. 504 begins where 7(a) is already large: its lower quartile, $141,500, is above the 7(a) median, its median of $233,000 is close to the 7(a) upper quartile, and its upper quartile is $426,000. A typical 504 salon loan is the size of a top-quarter 7(a) salon loan, consistent with a program confined to fixed assets. A study should open by placing the request in this spread, because a $30,000 equipment loan and a $426,000 premises loan are both salon loans and a lender underwrites them as different credits.

504 by size band

504 salon loans peak in the second band, with 219 loans and $49.9 million, against 152 at $150,000 or less ($16.2 million) and 152 in the band just under the million-dollar mark ($87.6 million). Above that, 24 loans sit in the next band with their dollars withheld, and 4 in the band after it, too few loans for a dollar figure. The 504 salon book is a book of modest premises. A 504 salon study is sizing a small commercial property, and the appraisal and the build-out budget weigh as heavily in it as the operating case.

Cancellation: failing before funding

Cancellation floors are close between the programs, 10.8% for 7(a) and 11.7% for 504, measured on FY2017 to FY2024 approvals, and 504 is the higher. A 504 salon loan buys fixed assets, so it depends on a property closing as well as on a business plan, and its record shows deals falling away before funding rather than after: 11.7% cancelled against a 0.00% charge-off floor. The study helps where it can, by testing the build-out budget against what the landlord or seller puts in, the purchase price against the cash flow, and the opening date against the lender's commitment.

Charge-offs: inside five years and after

Under 7(a), 4.4% of the measured salon loans were charged off within five years and 8.0% to date, so salon losses did not stop at year five. Risk does not end with the ramp: a salon that fills its chairs can still lose its senior stylists or its lease in a later year. The study's coverage test should run across the loan's term, with a case in which the book shrinks after stabilization, not only a slow start. On the 504 side both measures stand at 0.00%: the measured cohort shows no charge-off yet, a floor rather than a promise, and a 504 salon study should still show what the premises would fetch from a buyer outside the salon trade.