Beauty Salon Feasibility Study in Massachusetts

Massachusetts lends to beauty salons well beyond what the national pattern would predict. Salons rank 3 of 39 among the state's asset classes, and the location quotient of 1.49x means they take a markedly larger share of Massachusetts SBA lending than they do nationally. Between FY2017 and FY2026 Massachusetts approved 389 salon loans totalling $53.8 million, which puts it 6 of 54 among states. The figure that sets the cell apart, though, is the median loan: $55,000, just 0.55x the national salon median. It separates the cell from both the state's all-class lending and salons nationwide.

What a $55,000 median means at the chair

A median that low means most Massachusetts salon loans are small ones. The central half of loans runs from $25,000 to $130,700, and 347 approvals went through SBA 7(a) against 42 through SBA 504. Franchise units are only 3.1% of the book, so most units are not franchised. Eastern Bank dominates, holding 123 loans worth $9.4 million, with TD Bank, National Association at 33 and both Santander Bank, National Association and Salem Five Cents Savings Bank at 13. Bay Colony Development Corporation leads the 504 lenders with 18 loans. Eastern Bank's position is measured by loans it holds now, which is how SBA reports every lender.

Outcomes behind the small loans

Salon approvals later cancelled run between a floor of 11.2% and a ceiling of 11.5%, a narrow band showing that very few Massachusetts salon approvals were still waiting to fund. As for losses, Massachusetts salon loans written off after disbursement in FY2017 to FY2021 make up at least 5.4% of that cohort of 185, and 2.7% went bad inside five years of approval. Since these are floors on a cohort still partly open, a lender should treat them as the least the class has lost here, not the most. Lending fell to 12 approvals and $2.0 million in FY2021 before recovering to 43 approvals and $8.1 million in FY2024.

The study a Massachusetts salon needs

Approvals sit mostly in the eastern counties: Middlesex has 98 approvals, Essex 69, Suffolk 45 and Norfolk 43. A study has to show that the chosen trade area can fill chairs or suites against that existing base, and that pricing holds once stylists' commission or rent splits are paid. Cost testing is about the build-out and equipment, since a loan near $55,000 has little room for an overrun. Debt service coverage should be proven on the owner's own client book, and where an acquisition is financed, the business valuation stands in for the appraisal and must support the price paid for goodwill. The salon class carries no coding caveat.