SBA 7(a) Beauty Salon Feasibility Study in Alabama

Beauty salons are small borrowers, and Alabama's cell makes that plain: the median loan is $114,900, half of the 45 loans lie between $48,000 and $200,000, and the whole cell totals just $12.1 million for FY2017 to FY2026. Against the nationwide 7(a) salon median the Alabama figure is 1.32x, so within a small-dollar class the state runs larger than average. Alabama is 37th by loan count, but beauty salon is 8 of 39 among Alabama classes, a high placing within the state's own mix. Chains account for 13.3% of the loans.

Geography without a lender list

No lender is listed for Alabama salons, and so none is named, leaving the holders of these loans unknown. Counties are concentrated: Jefferson has 17 loans, Baldwin, Madison, Mobile and Shelby 4 each, Lee and Montgomery 2, and Barbour, De Kalb and Escambia 1 each. A borrower seeking financing in Alabama should expect that most of the record comes from the Birmingham area.

Trend and the cancellation floor

Yearly counts were 8 in FY2017 with $1.3 million, then 2, 4, 6 and 7, a single loan in FY2022 at $53,500, and 4, 5, 5 and 3 after that. A year such as FY2019, with 4 loans and $5.1 million, shows that one large project can distort a small class. Cancelled approvals make up no less than 13.5% of those made through FY2024, and adding undisbursed loans leaves that share untouched. For a class this small the implication is practical: roughly one approval in seven did not reach a closing, so a lender and a borrower should plan for the possibility that a lease, a licence or a stylist roster falls through.

Loss rate left out

The charged-off rate is withheld since there are too few funded loans in the cohort to publish a rate. It is not stated as zero and should not be assumed to be.

Studying an Alabama salon

A study should test the chair count against realistic client volume, stylist retention and whether stylists rent chairs or are employees, lease length and build-out cost, and product and booking revenue. Because the loan is small, a lender will care about the borrower's experience and the lease more than the real estate. Coverage should be run with stylists leaving for a competitor. Where the borrower buys a building, ask whether a second tenant could take part of it.