SBA rules · SOP 50 10 8.1

Can an SBA loan finance a salon or barber shop that rents chairs?

Often yes. Salons and barber shops are eligible even when the stylists are contractors, but a business that earns rent for assigned chairs or suites can be treated as an ineligible landlord.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Personal services exception: Barber shops, hair salons, nail salons, and similar personal services businesses are eligible, regardless of whether they have employees or contract with individuals to provide the services that the business is providing directly to the public.
Salon suites and rental space ineligibility: Business models like office suites (aka salon suites) that generate income by renting space to accommodate independent businesses providing services directly to the public are ineligible passive businesses unless revenue is earned through membership dues rather than rent, customers do not have assigned or personalized space, and the business maintains the space and equipment.
Combined models prohibited: A business is either fully eligible or fully ineligible; if a business operates a combined model where part of the revenue is from rent or provides for an assigned space model, it is ineligible.
What the SOP does not settle: The SOP does not specifically name booth rental or chair leasing, so it does not settle whether leasing a specific chair to a contractor for a rental fee is treated as contracting for services or as an ineligible passive rental model.

Reading the rules together

Leasing chairs versus contracting for services: If a salon charges chair rent to independent contractors who run their own separate operations from assigned stations, SBA could classify the business as an ineligible landlord or salon suite model because revenue derives from rent for assigned space. Conversely, if the independent contractors provide services on behalf of the salon business directly to the public, the arrangement fits the explicit personal services permission.

The SOP does not say this in one place. Confirm it with your lender.

The source

What the SOP says

“Businesses such as barber shops, hair salons, nail salons, and similar types of personal services businesses are eligible, regardless of whether they have employees or contract with individuals to provide the services that the business is providing directly to the public. (See subparagraphs a) and c) above regarding ineligibility of developers and landlords.)

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Note (lines 432-434)✓ Verified

“Shopping centers, office suites (aka salon suites), ghost kitchens, and similar business models that generate income by renting space to accommodate independent businesses that provide services directly to the public are not eligible unless all of the following apply:

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Passive Businesses 13 CFR § 120.110(c): (lines 406-418)✓ Verified

“The revenue is earned through membership dues (not rent); and

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Passive Businesses 13 CFR § 120.110(c): (lines 406-418)✓ Verified

“The business’s customers do not have an assigned space that they know they can return to each time they visit (i.e., customers do not get an office with a lockable door or a particular kitchen setup and the space cannot be personalized); and

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Passive Businesses 13 CFR § 120.110(c): (lines 406-418)✓ Verified

“A business is either fully eligible or fully ineligible. If a business has a combined model (part of the revenue is from rent and part from membership dues or they provide for options where there is an assigned space model), it is not eligible.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Passive Businesses 13 CFR § 120.110(c): (lines 406-418)✓ Verified

Have a deal in mind?

Tell us about it and we will tell you how these rules apply, and which lenders finance deals like yours.

See if your deal qualifies →Broker or lender? Ask the SOP your own question