Flexible financing options to launch or expand your beauty salon.

Wondering about your options for salon business loans? The beauty industry is one that continues growing. The Bureau of Labor Statistics claims it will grow 13% faster over the next 10 years. You need funds to keep up with trendy new styles, products, and equipment. There’s not always extra cash laying around to invest. Depending on the season, it may even be tough to get the bills paid.

Whether you’re a startup or a seasoned salon owner, you have options to get funds for your beauty business. Start by pinpointing how you need to use the funds. From there, calculate your financing needs. Once you have the why and how, you’ll know your best option of the salon business loans.

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Beauty Salon Financing

How Can I Use Loans for Beauty Salons?

The way you use the loan depends on stipulations from the lender. Some allow borrowers to use the loan how they see fit. Others cover specific business needs, like the equipment loan we’ll discuss. To make sure you’re getting the right type of loan, make a list of your operational activities within the beauty salon.

Think about covering these business needs while doing financial planning for your salon:

This varies based on several factors. The size of your salon could mean more or less in expenses. Your location, the economy, and the length of time you’ve been in business could also affect your cash flow needs. The amount also depends on your budget for each area of expenses.

You may want state-of-the-art chairs and dryers or just basic ones. You may invest a small amount in digital marketing versus spending thousands on billboards. If you charge booth rent, you don’t have to worry about payroll or commission. Lenders also review these factors to decide if you qualify for salon business loans.

Review the financial section of your business plan to see where you are. Yours may already include your beauty salon funding need. If you’re not on target, look at how much you fall short. Using the list above, compare your projected numbers to your actual business performance. That determines how much you need and how you’ll use the loan.

Most beauty salons can benefit from one of three types of small business loans: unsecured business lines of credit, equipment financing, and SBA microloans.

Unsecured Business Lines of Credit

Most entrepreneurs use unsecured business lines of credit for short term working capital needs. These loans work whether you want to preserve your beauty business cash flow or you’re cash poor. They’re the most flexible with how you can use the funds and the repayment terms. Unsecured business lines of credit have also been the most accessible for those still building.

Here’s how these business lines of credit work.

Like a credit card, an unsecured business line of credit is revolving debt. Unlike a term loan that ends at maturity, you can use a business line of credit, repay it, and use it over again. You pay variable interest on the outstanding loan principal. Lenders consider it unsecured because you don’t need collateral to qualify.

How to Qualify

Many small business owners turn to unsecured business lines of credit because they don’t have rigid requirements. Traditional bank loans might require lengthy business history, financial reports, high credit scores, and collateral. Unsecured business lines of credit base decisions on good personal credit history over the last five years.

Before you apply, be prepared by having:

Pros and Cons

The approval process is easier and quicker than other options. You’ll see have access to the money faster with unsecured business lines of credit. Your beauty salon can use the funds for whatever part of the business you need to. If you make payments on time, you can have lifetime access to the funds. The best advantage is that it helps borrowers build business credit.

The advantages outweigh the disadvantages with unsecured business lines of credit. Still, keep a few things in mind before applying. This source of funding has higher fees and interest and are not good for long-term funding. In other words, don’t use these to purchase high ticket items for your business. You’ll see a faster return by investing the money in marketing or your salon or products.

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Equipment Financing

If you need certain machinery to operate your business, you can lease or finance it. Your salon can get computers, hair dryers, pedicure chairs, and even vehicles on installment payments. For equipment you plan to own and keep, a loan is best. If you plan to upgrade the equipment to keep up with the latest trends, look into equipment leading.

With equipment leasing, you can end the lease, buy the equipment, or lease new equipment at the end of your term. With equipment loans, you finance new or used equipment and pay installments plus interest. Many equipment resources offer their own financing solutions. You can apply in-house or they may work with other lenders.

Pros and Cons

Equipment financing lets you can keep your business cash flow and pay large equipment off over time. Approval is fairly easy because the equipment serves as collateral. That means there’s not much emphasis on credit score and history. Current tax rules also allow a deduction of up to $500,000.

Depending on how your business changes, a drawback may be the beauty salon having outdated equipment when the loan matures. Interest rates can also be high, ranging from 8% to 30%. If leasing, you can also expect to pay more than buying over the long run.

SBA Microloans

The Small Business Administration is a reliable resource to find lenders for various types of financing. For beauty salon loans, their microloan program is the best option. It’s lending for startups and growing entrepreneurs. The SBA partners with banks to offer small loans of up to $50,000. You can use the loan for working capital, real estate, business startup/expansion, etc.

How to Qualify

SBA programs have more rigid requirements than unsecured lines of credit or equipment financing. The basic requirements are that you have a physical U.S. business location, are an official for-profit business, and have contributed your own investments (time and money) in the business. You also can’t qualify for funding with other lenders outside the program.

Pros and Cons

If you’ve had time to build strong business or personal credit, an SBA Microloan may be perfect for you. Patience is also key with this loan because the process can be a lengthy one. The loans normally have low interest rates compared to alternative options. The loan application checklist may give you more insight into what to expect and if the pros outweigh the cons.

How to Get Help Applying for Salon Business Loans

If you want to open or expand your beauty salon, you don’t have to do it alone. LenCred helps entrepreneurs and small business owners get unsecured financing. We can review your options for beauty salon loans and help you apply. Contact us today!