Business loans and financing for beauty salons

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If you work in the beauty salon business, you know that opening and running a beauty salon doesn’t come cheap. Your business needs to cover a wide range of expenses, from items like hair color and combs to paying for stylists who work for you. Business loans for beauty salons can help you stimulate growth and finance other business initiatives.

Even if your salon is thriving, you may find yourself strapped for cash every now and then. It may be a slack season, or you may need to make a big investment in your business, and you will need the cash available to do so.

To conserve cash, explore your business financing options.

How a Business Loan Can Help Your Beauty Salon

Before delving into your loan options, why take out a loan?

Small business loans can give you the working capital you need to keep your hair salon running smoothly. This could mean you have the option of opening a second location… or just paying your stylists and business expenses during a slack time.

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

Types of loans for beauty salons

When it comes to loan options for your beauty salon, you have several. Which choice you choose depends on your specific needs, as well as the type of financing options you are eligible for.

Term loans

Also known as working capital loans, they are often offered by traditional banks and credit unions, although there are also online lenders that offer longer term loans. These tend to offer decent rates, although qualifying them can be more difficult than with other options.

SBA loans

The Small Business Administration offers several loan programs, but the SBA 7 (a) is by far the most popular. You can use SBA loans like this for various 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 all at once, and that’s where a business line of credit comes in. You are approved for a fixed amount and can borrow up to that amount at any time. Once you’ve paid it off, you can borrow it again.

Equipment financing

You will likely need to purchase some equipment for your salon, such as hairdryers and professional chairs. Equipment loans are specially designed to help you get new equipment without breaking the bank.

Credit card

Business credit cards are another option to help cover your salon expenses, and if you use a rewards card smartly and pay off your balance in full each month, it can be like you get paid to use it. !

Short term loan

If you don’t have good credit, there are short-term loan options that will get you the financing you need, but at a higher cost. These lenders tend to look at other qualifying factors in addition to your professional and personal credit scores.

Merchant cash advance

While not technically a loan, a merchant cash advance earns you money based on the credit card sales you pay back daily or weekly from your transactions. Interest tends to be higher on this option.

How to get a business loan for a beauty salon

The application process for salon owners can vary from lender to lender, but in general there are a few things you can expect to be asked in the application process:

  • Details about your business (address, location, time in business)
  • Annual revenue
  • Your social security number

Hair salon finance lenders will review your personal credit history if you have no business credit history. If so, find out how to set up business credit so you can benefit from even better rates.

You will also be asked for the loan amount you are requesting in the loan application, along with your bank account details so that the funds can be quickly deposited into your account once you are 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 looking for financing.

With some financing options, like bank loans and SBA loans, your business or personal credit score will be heavily considered in the decision-making process. Although not guaranteed, a high credit score can help you get lower interest rates and favorable repayment terms.

How long you’ve been in business will also be important. Many lenders do not want to donate money to a salon that has been in existence for less than two years. Being in business for a while shows that your business has established itself and has stable income, and therefore being able to make these monthly payments.

Your annual income, debt-to-credit ratio, and monthly expenses may also be factored into your application.

Research the lender you are considering to find out their qualifications, if they are posted on the website (not all lenders make this information public). If you don’t meet the credit score requirements, for example, look for another lender. It’s always a good idea to shop around, as you might end up with a better deal if you apply to multiple lenders.

And if you can’t qualify for an SBA loan or a traditional loan, know that there are other options like short term loans, cash advances to merchants and credit cards, but consider them. carefully, as they will cost you more, with higher interest. tariffs and assembly costs.

Nav’s verdict: Loans for beauty salons

If your beauty salon business could benefit from an injection of cash, consider beauty salon loan options like the ones we’ve discussed here. Business financing can be a good idea, as long as you understand how you will be using the money to grow your business. After all, beauty salon loans are expensive for you, so make sure they will give you a solid return on your investment.

This article was originally written on June 21, 2021.

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