Beauty Salon Feasibility Study in Missouri

Larger salon loans, a smaller slice of Missouri lending

A Missouri salon loan is bigger than the typical salon loan elsewhere. The median SBA loan to a Missouri beauty salon was $145,500, or 1.46x the national median for the class. That alone does not make the cell distinctive by our test, which also asks a measure to stand apart from Missouri's lending across every asset class, and on that fuller test no Missouri salon measure qualifies, not the median and not either outcome rate. The state approved 117 salon loans from FY2017 to FY2026, worth $21.4 million. Missouri ranks 23 of 54 states on salon loan count and the class stands 9 of 39 inside Missouri, while a location quotient of 0.81x shows salons hold a smaller part of Missouri's SBA lending than of the national book.

The spread of loan sizes is wide. Missouri's middle half reaches from $30,000, the size of an equipment or working-capital loan, to $248,000, enough to buy an established salon or fund a full build-out. SBA 7(a) carried 110 of the loans and SBA 504 just 7, so very few Missouri salon owners used the program designed for buying property. Franchised concepts take 13.7%, a real minority. U.S. Bank, National Association, as current holder, has 20 Missouri salon loans that total only $875,300, the profile of a small-loan lender, while The Central Trust Bank holds 7 and Midwest Regional Bank 6, the last worth $1.8 million and so far larger per loan. Saint Louis County leads with 35 approvals, ahead of Jackson with 16 and Boone with 11, and Saint Louis City adds 9.

Losses are the Missouri warning sign

Cancellations are moderate. At least 10.2% of Missouri salon approvals made from FY2017 through FY2024 fell away after approval, and with none of them still undisbursed the ceiling is also 10.2%. Charge-offs are the harder number. Of the 54 Missouri loans that disbursed during FY2017 to FY2021, the share written off so far is 11.1%, and 5.6% went bad inside five years of approval, so Missouri salon losses kept coming after the early years. Both rates are floors and can rise as open loans age.

What a Missouri salon study must answer

With that loss record, a Missouri salon study has to work hardest on cash flow. Demand means the households and spending inside the salon's own trade area and the number of competing salons and suites, read county by county, since Saint Louis County and Boone are very different markets. Cost means the build-out, plumbing at each station, fixtures and the lease. Debt service coverage has to survive the departure of a senior stylist, who may take clients along, and should be tested at a loan near $248,000 as well as at the $145,500 median. The appraisal question is collateral: with so few loans under SBA 504, these borrowers rarely pledge a building, so a lender will look past a thin going-concern value to the owner's equity and guarantees.