SBA 7(a) Beauty Salon Feasibility Study

Small loans, real losses

The 7(a) program carries almost all SBA salon lending: 8,281 loans and $1.67 billion from FY2017 to FY2026. These are small loans. The median is $87,000, and the middle half spans $30,000 to $239,500, sizes that pay for chairs, build-outs, working capital or an existing salon far more often than a building. No metric clears our distinctness margin, because 7(a) is effectively the class; the figures here are the salon market's SBA baseline.

The charge-off record

Losses are the headline. Of the 3,287 salon loans that funded in FY2017 to FY2021, 8.0% or more ended in charge-off, and 4.4% failed inside five years. The cancellation floor, by comparison, is 10.8%, with a ceiling of 11.8%. A salon loan of this size is usually underwritten on cash flow more than collateral, and the charge-off floor says that cash flow often falls short. For a borrower, the number is a reason to prove the plan before borrowing: the stylists who will follow you, the rent you can carry and the months it takes to fill the chairs.

The Huntington National Bank dominates the lender table with 807 loans and $112.9 million. TD Bank, National Association follows with 494 loans but only $22.3 million, a sign of very small loans; U.S. Bank, National Association has 445 for $41.3 million, Manufacturers and Traders Trust Company 384 for $27.6 million and Wells Fargo Bank National Association 345 for $43.7 million. Texas edges California for the most loans, 733 to 723, ahead of New York with 590, Florida with 551 and Ohio with 454. Approvals dipped to 552 in FY2021 and then climbed every year to 1,192 in FY2025, before 816 in FY2026. Franchise salons account for 14.8% of loans.

What a salon study has to test

SBA's code here names the borrower's trade and nothing more, and no limitation line comes with it. For a 7(a) salon loan, the feasibility study has to test demand from the trade area's households and the salons, suites and booth renters already competing for them; the cost of the build-out, or the price of an existing salon against its verified revenue; debt service coverage after stylist pay and rent, at a realistic ramp; and, where real estate is involved, an appraisal of the space as general retail. For an acquisition, the study should test whether revenue stays when the seller, and the seller's clients, leave.