SBA 7(a) Beauty Salon Feasibility Study in New Jersey

New Jersey beauty salons under 7(a): small loans, one dominant lender

Beauty salons are the sixth class in New Jersey, and under 7(a) the state places 7 among states, with 352 approvals from FY2017 to FY2026 and $69.1 million in gross dollars. The loans are small. The median of $74,500 is 0.86x what salons borrow nationally under 7(a), and a mid-range ticket runs $25,000 to $237,375. Franchised salons account for 18.8% of loans, so most loans went to unbranded salons.

TD Bank and the other holders

TD Bank, National Association holds 100 loans worth $4.7 million, the largest count by far and a very small average. Manufacturers and Traders Trust Company has 45 loans worth $4.0 million, PNC Bank, National Association 17 worth $1.8 million, Northeast Bank 15 worth $1.8 million, and, smallest of the group, Wells Fargo Bank National Association with 11 loans and $1.9 million. Each row names an institution that SBA lists as a current or past holder. Bergen County has 55 loans, Essex 47, Monmouth 28, Burlington 26, Somerset 23, Morris 22, Camden and Ocean 21 each, Middlesex 19 and Union 18.

Floors

Charge-offs are the notable point. For the 129 loans in the funded FY2017 to FY2021 group, the charge-off floor is 7.8% to date, and inside five years it was 4.7%. Cancellation takes at least 13.5% of approvals through FY2024, or 15.4% when undisbursed loans count. Open loans can still fail, so all four are floors.

Testing a New Jersey salon

Small tickets do not remove the need for analysis. A study should measure the stylist and client base the salon can build, rents in the trade area, the commission or booth-rent model, and the competition in the immediate neighbourhood. Retention of key stylists matters because clients follow them. Fit-out and equipment should be compared with a ticket near $74,500, and the plan should show working capital for the months before the books fill. Run coverage with fewer chairs occupied. Because few hard assets stand behind a salon loan, the appraisal rests mainly on business value. A salon in a leased storefront should also document the remaining lease term, since a short one limits what the business is worth to a successor.