Week 21: One Salon Dreams Big — And Gets a Little Help From Uncle Sam

Kyle Simonson, founder and CEO of Minneapolis-based Simonson’s Salon and Spas, found a down economy was no obstacle to the continued growth of her four-location enterprise. Simonson’s Salon and Spa is one of three small businesses that have come together to build a new retail development in Maple Grove, Minn., as a result of a federal stimulus bill which enables the U.S. Small Business Administration to reduce or eliminate fees on 504 loans. These SBA-backed loans allow entrepreneurs to obtain funding for the purchase of land, buildings, or heavy equipment.

Simonson estimates her total cost savings on the SBA financing package as a result of the stimulus package was almost $25,000:

• $5,000 of that was instant savings (cash down at closing).

• $12,000 of it was savings as a result of a reduced SBA loan amount because of the fee waiver.

• About $7,800 was savings in interest over the 20-year life of the loan by borrowing $12,000 less. 

The existing Simonson’s location in Maple Grove is squeezed into a strip mall that does not do justice to the extensive interior of the salon and spa. “The location has expanded three times since opening in 1995, a strong indication that the new building is essential to supporting our rapid growth,” says Simonson.

Getting an SBA requires no small amount of paperwork, and a good track record. Small businesses will need to meet the following criteria:

1. Have a strong business plan.

2. Have a stake in the business.

3. Have a good personal credit rating.

4. Provide collateral.

5. Demonstrate management skills and experience in the business.

“Many experts agree that there has never been a better time to buy residential or commercial real estate,” says Simonson. “This extraordinary venture was made possible in large part because two other veteran businesses in the community were experiencing similar scenarios and glimpsed the possibilities. Together, we visualized, strategized, and then executed a plan to build a retail complex to house our relocated businesses.”

For others considering making a similar leap, she points out the advantages: “We’re moving from a leasing position to an ownership position with a relative hiccup in the projected monthly costs. This investment will have significant tax advantages too. Plus, real estate acquisition can provide owners with an income later on if they sell or close their business.”

— Judy Lessin