Business loans and financing for beauty salons

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If you are in the beauty salon business, you know that opening and maintaining a beauty salon is not cheap. Your business needs to cover a wide range of expenses, from things like hair dye and combs to paying for stylists who work for you. Beauty salon business loans can help you drive growth and fund other business initiatives.

Even if your salon is thriving, at times you may run into cash shortages. It may be a slow season, or you may need to invest heavily in your business and need cash for that.

To keep cash flow, explore financing options for your business.

How a business loan can help your beauty salon

Before we dive into your loan options, why take out a loan at all?

Small business loans can provide you with the working capital you need to keep your salon business running smoothly. This could mean you have the option to open a second outlet … or simply pay stylists and business expenses over a period of time.

Basically, a business loan gives you the freedom to take advantage of the business opportunities that may arise and also ensures that you never run out of money for what your business needs.

Types of loans for beauty salons

When it comes to loan options for your beauty salon, you have several. Which one you choose depends on your specific needs as well as what funding options you are applying for.

Term loans

Also called working capital loans, they are often offered by traditional banks and credit unions, although there are also online lenders offering longer term loans. They tend to offer decent rates, although qualifying for them can be more challenging than with other options.

SBA Loans

The Small Business Administration offers several loan programs, but SBA 7 (a) is by far the most popular. You can use SBA loans like this for a variety of expenses including working capital, real estate and equipment. SBA loan rates are among the lowest.

Credit line

You don’t always need a lump sum of cash and this is where a line of credit for business comes in. You get approval for a set amount and you can borrow up to that amount at any time. Once you pay it off, you can borrow it again.

Equipment financing

You will most likely need to purchase salon equipment such as professional hair dryers and chairs. Equipment loans are specifically designed to help you obtain new equipment at a low cost.

Credit cards

Business credit cards is another option to help you cover your salon expenses, and if you use your bonus card wisely and pay your balance in full every month, it might look like you are being paid to use it!

Short term loan

If you don’t have a good credit history, there are short term loan options that will provide you with the financing you need, but at a higher cost. These lenders tend to look at other qualifying factors besides your business and personal credit ratings.

Seller’s cash advance

While this is not technically a loan, the cash advance issued to the seller provides you money based on the credit card sales you pay each day or week on your transactions. Interest in this option is usually higher.

How to get a business loan for a beauty salon

The application process for salon owners can vary from one lender to another, but generally you can expect to be asked certain questions during the application process:

  • Detailed information about your company (address, location, opening hours)
  • Annual income
  • Your social security number

Hairdressing lenders will look at your personal credit history if you don’t have a credit history. If so, find out how to create a business loan so you can qualify for even higher rates.

You will also be asked to provide the loan amount you are requesting in your loan application as well as your bank account details so that funds can be quickly deposited into your account once approved.

What does it take to qualify for a beauty salon loan?

Each lender will have a different set of qualifications for small business owners seeking funding.

With some financing options, such as bank loans and SBA loans, your business or personal credit rating will greatly influence the decision-making process. While not guaranteed, a high credit rating can help you secure lower interest rates and favorable repayment terms.

It is also important how long you have been in business. Many lenders are reluctant to give money to a salon that has been in business for less than two years. Being in business for a while shows that your business has proven itself and has a steady income, which means you can make those monthly payments.

Your application may also include your annual income, debt-to-loan ratio, and monthly expenses.

Research the lender you are considering to find out what their qualifications are if they are published on the website (not all lenders publish this information). For example, if you do not meet your credit rating requirements, look for another lender. It’s always good to look closely because you can get a better deal if you apply with multiple lenders.

And if you cannot qualify for an SBA loan or traditional loan, be aware that there are other options, such as short term loans, seller cash loans and credit cards, but consider them carefully because they will cost you more with higher interest rates. and registration fees.

Nav Verdict: Loans for Beauty Salons

If your salon business could benefit from a cash injection, consider beauty salon loan options like the ones we discussed here. Business financing can be a smart idea if you have a clear idea of ​​how you will use the money to grow your business. After all, beauty salon loans cost you dearly, so make sure they pay off.

This article was originally written on June 21, 2021.

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