Beauty Salon Feasibility Study in the Minneapolis-St. Paul-Bloomington, MN-WI Metro Area

Tenth of 546 areas for salon lending

Minneapolis-St. Paul-Bloomington ranks 10 of 546 areas for beauty salon loans, and salons are fifth of 39 among the classes inside it. SBA approved 188 salon loans worth $44.8 million over FY2017 to FY2026. With a location quotient of 1.09x, salons are only a little more common here than nationally, so the rank is explained mostly by the scale of the market. Hennepin County has 76 of the loans, Ramsey County 27, Dakota County 25, Washington County 19, Wright County 10, Anoka County 8 and Scott County 6.

Salon loans here are larger than the class norm: the $131,750 median is 1.32x the national median, and the central half spans $43,000 to $256,550. SBA 7(a) accounts for 170 loans and SBA 504 for 18. Franchise flags appear on 13.8% of loans, which leaves single-location independents as the typical borrower.

Holders in the Twin Cities

SBA's lender list gives the holder at present for each loan. Amplio Economic Development Corporation is the one 504 holder listed, with 6 loans worth $1.5 million. In the 7(a) roster U.S. Bank, National Association comes first with 21 loans worth $3.8 million, 14 loans each are held by Old National Bank ($3.9 million) and Wells Fargo Bank National Association ($1.3 million), Sunrise Banks National Association holds 10 worth $933,000, and The Huntington National Bank 9 worth $3.1 million. Old National's average loan is much larger than Wells Fargo's. This is a catalog of holdings and says nothing about how a holder would treat a request.

Roughly 13.3% of approvals, or more, were cancelled from FY2017 through FY2024, and the ceiling is withheld for this cell. In the group of 80 loans disbursed over FY2017 to FY2021, charge-offs have reached 6.3% at least, and the rate inside five years is withheld, so it is left blank here and is not a zero. Yearly approvals started at 9 in FY2017 with $956,800 and peaked at 28 in FY2022, worth $11.1 million, before easing to 12 in FY2026.

What a salon study in the Twin Cities has to test

A salon study first works out how many stylists the space can hold and how they are paid, since a booth-rental salon and a commission salon have different cash flows and different risks if a stylist leaves with clients. Demand is a function of the households within a short drive and their income, and of the salons and chains already in that trade area. Build-out for plumbing and ventilation is a real cost, so the lease term should be long enough to recover it. Cold seasons do not stop hair appointments, but they can change the pattern of weeks with missed visits, which cash flow should allow for. The debt service test has to include the months before every chair is rented. Area totals include only loans whose project county was matched on the July 2023 list; the rest are absent, so the Twin Cities figures run low.