Beauty Salon Feasibility Study in the San Francisco-Oakland-Fremont, CA Metro Area

Higher tickets, higher failure rates

San Francisco-Oakland-Fremont beauty salon lending looks like Los Angeles and Houston in miniature: a median of $150,000 that is 1.50x the class's national median, a location quotient of 0.85x, and a charge-off record that stands out. SBA approved 99 loans between FY2017 and FY2026, worth $32.6 million, with the central half running from $41,000 to $379,600. The area is 21 of 546 for the class, and salons are tenth of 39 locally (10 of 39).

Charge-offs on a small cohort

Among the 45 loans approved in FY2017 through FY2021 that funded, at least 13.3% have been charged off so far. With a cohort this small, one more failure would move the rate visibly, which makes the figure a direction and not a precise measure. The five-year charge-off rate, the fuller cancellation figure and the counts for FY2021 and FY2022 are all held back by the source, each on too little lending; none is zero. Only the cancellation floor is printed, at 13.2% for the FY2017 to FY2024 approval years.

Mix and spread

Program counts: 91 loans carry SBA 7(a) and 8 carry SBA 504. Franchised salons are 12.1%. The loans are spread evenly: Alameda County has 24, Contra Costa 24, San Francisco 23, San Mateo 18 and Marin 10. Yearly counts run from 16 in FY2017 to 8 in each of FY2019 and FY2020, with 12 in FY2024 and in FY2026.

Holders

Two large banks tie at 10 loans each. U.S. Bank, National Association brings $1.7 million; Wells Fargo Bank National Association, a mere $407,500. Main Street Launch holds 7 loans worth $1.3 million, Northeast Bank (ME) 6 worth $577,000 and East West Bank 5 worth $2.8 million. The holder is the one SBA currently records, and the table does not describe how any institution underwrites salons.

Testing a Bay Area salon

A study should be built around the chair or suite count the site supports and the stylists' own books of clients, since the loss record suggests that income depends on a few people. Rent and labor in the Bay Area are high, so rent per chair and revenue per chair belong at the center of the cash flow, with a case where a stylist leaves. If the project is a franchise, fees and design standards go on the cost side. An appraiser will have little collateral beyond equipment and improvements. The area follows July 2023 county placement, so counties not on the list contribute nothing here.