Check out the Financing from the Small Business Administration (SBA)
The Small Business Administration (SBA) guarantees loans to small businesses through its lender network; lenders who have been pre-approved by the SBA. The SBA has some stiff criteria but offers fairly low rates; rates below 10% and an amortization schedule that runs 25 years. They are a great resource for loans for spa small business loans.
The SBA 7(a) Loan
The SBA 7(a) loan can be used to meet just about any business need, even spa business loans.
SBA 7(a) loans are the most requested and approvable type of loan offered by the SBA. The maximum SBA 7(a) loan is guaranteed to $5 million. This loan’s purpose includes debt refinance, the purchase of real estate, working capital or to even buy a business. l
SBA 7(a) loans are a great fit for the majority of businesses who are seeking working capital financing.
Startups must meet stricter underwriting guidelines. The startup entrepreneur will be required to verify previous business and managerial experience by submitting a well-written comprehensive business plan. Each business plan includes detailed projections of income and expenses for up to five years, as well as documented plans on how the business will work within the first twelve months.
Pros– SBA loans are popular because of their long repayment periods and their low interest rates. SBA 7(a) loans offer one of the most affordable working capital financing.
Cons– Applying for an SBA loan is a time consuming and complicated process. It will take a lot of trips to your bank, or lender, and requires an extensive list of documentation. Generally, an SBA loan’s processing time runs between 1.5 months through 3 months before funding.
When applying for an SBA loan, it’s important to find a lender who specializes in SBA loans. This will ensure that your loan application will be presented in its most favorable light. This increases the chance that an applicant will receive an approval.
The SBA Microloan
The SBA Microloan program is unique as it offers loans specifically to intermediary lenders who operate as non-profit organizations. The intermediary lenders then manage the financing of small for-profit businesses or nonprofit child care facilities. Generally these intermediary lenders provide maximum financing up to $50,000. In 2016, Microloans amounted to a total of $58 million.
The nonprofit intermediary lenders have the option of borrowing upwards of 3/4 of a million dollars during the first year of their business relationship with the SBA. After the first year, the nonprofit intermediary lenders can borrow upwards of $1,250,000 per year; however no one intermediary can can more than $5,000,000 at any one time.
The Plusses –Microloans terms range up to six years. The average SBA loan size slightly exceeds $14,000. They are a great option for small business startups, like a spa services business. The nonprofit intermediary lender has the capability of underwriting with more flexibility than the large financial corporations. But note, nonprofit intermediary lenders will require borrowers to comply with their underwriting guidelines.
The Minuses – The SBA does not guarantee any portion of the loans made under the SBA Microloan program.
Available Equipment Financing Options
Equipment financing varies. One can lease equipment or obtain a loan to purchase equipment.
Equipment Leasing – Like a car lease, an equipment lease sets the terms for the person ‘borrowing’ the equipment during the lease terms. During the lease agreement period, the lease company are the owners of the equipment and the lessee pays a monthly payment to use the equipment. When the term expires, the lessee returns the equipment, upgrades the old equipment or chooses to buy it.
Equipment Loans – A business owner borrows money from a equipment lender to have the funds available to pay for the equipment they wish to own. The monthly payment repays the loan and also includes the monthly interest generated by the outstanding balance. Equipment loan terms vary and are part of the financing negotiation.
The spa service industry is growing rapidly. Many players are vying to fill the many unmet needs of the spa industry. There are several ways to obtain spa business loans which will allow you to open your spa idea. Contact us at LenCred to help you decide which loan is best for your specific circumstance: an SBA loan, an Unsecured Business Line of Credit or an Equipment loan, or perhaps a combination of financing options.