SBA 7(a) Beauty Salon Feasibility Study in Minnesota

Minnesota salons borrow more than the national pattern

Beauty salons are the fifth-ranked class in Minnesota, and the state ranks 11 among states, with 219 approvals between FY2017 and FY2026 worth $44.8 million. The ticket is the point of interest. A median of $123,000 is 1.41x what salons borrow elsewhere under 7(a), and most mid-sized loans fall from $35,000 to $227,050. Franchised salons account for 14.2% of loans, so Minnesota operators are mostly independent owners taking above-average amounts for chairs, build-out and equipment.

Large banks and one small outlier

U.S. Bank, National Association heads the table with 23 loans and $4.0 million, with Old National Bank next at 18 loans and $4.5 million. Wells Fargo Bank National Association accounts for 15 loans and $1.3 million, The Huntington National Bank for 13 loans and $3.7 million, and 10 loans and only $933,000 with Sunrise Banks National Association, the smallest average by a wide margin. SBA labels each as a current or past holder, which says little about its credit appetite. Hennepin County leads with 68 loans, Dakota and Ramsey each have 24, Washington 18, Stearns 15, Wright 8, Anoka 6, and Blue Earth, Saint Louis and Scott 5 each.

Floors and what they imply

Cancellation took a floor of 10.7% of approvals made through FY2024; with undisbursed loans included the figure is 11.8%. The 101 loans funded early show charge-offs at a floor of 5.0% so far and 4.0% by year five. The small distance between those two charge-off figures tells a lender that most losses came early in a loan's life. Open loans can still add to both.

Testing a Minnesota salon

A study should measure the clientele a location can draw, the competing salons and suites within a short distance, and the stylist base the owner can recruit and keep. It should test the commission or booth-rent structure, lease cost per chair, and the equipment and renovation budget against a ticket near $123,000. In a climate with long winters, appointments can dip, so monthly cash flow matters. Show coverage with several chairs empty. Because salons own little beyond equipment, an appraisal rests on business value, and the lease terms are part of that value.

A salon outside the leading counties will find few local precedents here, since Hennepin, Dakota and Ramsey head the county table, so the study should state which nearby market supplies its rent and pricing evidence.