Beauty Salon Feasibility Study in Michigan

Smaller loans than salons elsewhere

The defining feature of Michigan's beauty salon file is size. The median loan is $70,000, only 0.70x what salons borrow at the national median, and that gap is what separates Michigan salons from both the state's overall SBA lending and salon lending nationally. The middle half of approvals sat between $27,500 and $210,250. In all, 300 loans totalling $49.8 million were approved from FY2017 to FY2026, with volume ranging from 16 in FY2019 to 46 in FY2025.

Small tickets change what the loan is for. At this size a Michigan salon loan is more likely to fund chairs, stations and fit-out work, or to buy an existing salon, than to buy a building, and the program mix agrees: 282 loans came through SBA 7(a) and just 18 through SBA 504. Michigan ranks 10 of 54 states for salon loans, salons rank 8 of 39 among Michigan classes, and a 0.92x location quotient puts them just under national weight.

Huntington carries the Michigan file

Of the 300 Michigan salon loans, 151 are held today by The Huntington National Bank, worth $13.3 million. No other lender comes close: Northeast Bank holds 10, Fifth Third Bank and Newtek Bank, National Association hold 7 each, and Citizens Bank, National Association holds 5. For a borrower that concentration is practical information, since that bank's appetite has shaped much of the Michigan salon file. For a competing lender it marks a market with room for a second active program. Franchise brands account for 7.7% of loans.

The floors deserve attention. Michigan salon approvals from the FY2017 through FY2024 years carry a cancellation floor of 9.5%, and the ceiling climbs to 13.0% once undisbursed loans count as cancelled, a gap made of approvals still waiting to fund. Of 109 Michigan salon loans funded between FY2017 and FY2021, charge-offs have claimed 5.5% at minimum, and all of that loss arrived inside five years of approval, at the same 5.5%. These are floors, not settled outcomes.

What a Michigan salon study must prove

Because the loans are small, the margin for error is small too. A feasibility study has to establish demand chair by chair: how many stylists the trade area supports and how many clients each one brings, in a file where Oakland, Wayne, Kent and Macomb counties hold 72, 47, 33 and 21 of the approvals. Cost should be shown line by line for build-out and equipment. Debt service coverage must survive the loss of a senior stylist and the clients who follow that stylist out the door. Where real estate is involved, the appraisal should be read separately from the business, since salon goodwill does not secure a loan the way a building does.