Beauty Salon Feasibility Study in Texas

Charge-offs and size set Texas apart

Loan size and loss separate Texas salon lending from both the state's overall SBA book and the class nationally, and both matter to a lender. Size first: the Texas median loan of $180,000 is 1.80x the national salon median, with the middle half between $66,975 and $323,500. Then loss. Among the 372 Texas salon loans that funded in FY2017 through FY2021, 12.4% or more have been charged off to date.

The timing of that loss is the part to study. Only 4.8% of that Texas cohort was charged off in the five years after approval; most of the 12.4%, then, arrived later, in loans that had already passed their early years. A lender cannot treat a clean first five years as proof that a Texas salon loan is safe, and a borrower should expect underwriting to look past the opening period to the lease term and the useful life of the build-out. Both rates are floors, since part of the cohort is still repaying.

A large, franchise-heavy, 7(a) market

Texas is 2 of 54 states for salon loans: 750 approvals, $199.3 million, FY2017 through FY2026, at a location quotient of 1.16x, though the class stands only 11 of 39 among Texas asset classes. Franchise concepts take 32.8% of loans, and SBA 7(a) carries 733 of them against 17 under SBA 504, so these are business loans first. The lender list is broad: Wells Fargo Bank National Association holds 61, The Huntington National Bank 58, PNC Bank, National Association 41, Simmons Bank 40 and Newtek Bank, National Association 34. LiftFund, Inc. leads the small 504 side with 7. Volume has been uneven, from 125 approvals in FY2017 down to 29 in FY2022 and back up to 121 in FY2025, worth $31.6 million.

Cancellation is not one of the distinctive measures here: Texas salon approvals in FY2017 through FY2024 show a floor of 9.5% and, with undisbursed loans counted, a ceiling of 9.8%.

What a Texas salon study should test

Given larger loans and a loss record that keeps building after year five, a feasibility study has to test durability, not only opening demand. Demand work in Harris, Collin, Dallas, Tarrant and Travis counties, which hold 133, 71, 69, 66 and 62 of the approvals, should measure how many salons and suites already compete for the same stylists and clients. Cost must cover the build-out against the length of the lease. Coverage has to hold under stylist turnover and, where a brand is involved, after the brand's ongoing charges. The appraisal should be tested on what the space and equipment are worth if the concept closes late in the loan term rather than in its first year.