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Original Article: https://salonbusinessboss.com/ In this article we go over some key factors that will help hair salon owners locate loans and grants that they can apply for. But we also reveal what it takes to get approved.  Hair salons can be extremely rewarding ventures, but they also include a great deal of overhead. Hairdresser funding is a great method to get the working capital you need to begin your business, grow your existing salon, or simply handle the costs related to this kind of business. There are many available options when it comes to hair salon financing. The most common alternatives include SBA loans, SBA micro-loans, business lines of credit, and equipment financing. Other options to secure the capital needed for a hair salon are investors, crowdfunding, and applying to accelerators. But, before you choose the one that is right for you, there are certain things to consider, such as:
You need to know your needs, desires, and limitations as these will permit you to examine the kind of funding you can acquire-- which will benefit your business one of the most. For that reason, the more comprehensive and in-depth you are, the much better your opportunities of protecting a loan. Furthermore, if you do not already have a business plan, this will be the time to develop one! Types of Hair Salon LoansAs we mentioned before, there are different types of loans you could apply for when looking to fund your hair salon. Below, we would go over the most popular loans, so you can make an educated decision as to which one best suit your needs: • SBA loan The Small Business Administration (SBA) is a federal agency devoted to helping entrepreneurs develop their small businesses, benefit from contracting opportunities, and gain better access to conventional small business loans. An SBA loan – especially SBA 7(a) loans are a great way to secure funding for your hair salon if you have strong credit and are not pressed with time. Why? Simple, SBA loans are very competitive, require a lot of paperwork, and usually take between one to six months for approval and funding.
However, SBA loans deserve the wait as they feature a wide variety of benefits, consisting of extremely low deposits, prolonged payment terms, affordable rates of interest, and more. • Micro-SBA loan As mentioned above, SBA loans are very competitive and demand a lot on your part. Thus, if this is your first time as an entrepreneur or your salon does not have the required credit history, odds are you will not qualify for an SBA 7(a) loan. But, there are other SBA micro-loans designed to help business owners in your position. These types of loans are usually between $20,000 – $50,000. And to earn one, you must present a solid business plan and commit to repaying the loan in no more than six years. Furthermore, it is also worth noting that women, minorities, and veterans are awarded microloans very quickly. • Equipment Financing If you have already managed to secure funding but need a little extra money for equipment, you will be happy to know that there are specific financing options for this type of requirement. Equipment financing loans are very straightforward. You usually will get a quote for the total sum of the equipment you want to buy, and a lender will front you a significant portion of the cost. Plus, unlike other loans, equipment financing does not require guarantees as they are “self-secured” loans. Meaning that the assets you are financing serve as collateral for the loan itself. • Business line of credit A business line of credit is a smart choice if you are having cash flow issues or if you are presented with a business emergency (e.g., flood, robbery, lawsuit) To secure a business line of credit, you will need to apply (just like you would for a traditional loan), and the lender or institution will establish certain conditions. If you are approved, you will be given a maximum expense amount that can go from $10K to $1M depending on the institution.
However, SBA loans are worth the wait because they include a huge selection of benefits, consisting of extremely low deposits, prolonged payment terms, affordable rates of interest, and more. • Micro-SBA loan As mentioned above, SBA loans are very competitive and demand a lot on your part. Thus, if this is your first time as an entrepreneur or your salon does not have the required credit history, odds are you will not qualify for an SBA 7(a) loan. But, there are other SBA micro-loans designed to help business owners in your position. These types of loans are usually between $20,000 – $50,000. And to earn one, you must present a solid business plan and commit to repaying the loan in no more than six years. Furthermore, it is also worth noting that women, minorities, and veterans are awarded microloans very quickly. • Equipment Financing If you have already managed to secure funding but need a little extra money for equipment, you will be happy to know that there are specific financing options for this type of requirement. Equipment financing loans are very straightforward. You usually will get a quote for the total sum of the equipment you want to buy, and a lender will front you a significant portion of the cost. Plus, unlike other loans, equipment financing does not require guarantees as they are “self-secured” loans. Meaning that the assets you are financing serve as collateral for the loan itself. • Business line of credit A business line of credit is a smart choice if you are having cash flow issues or if you are presented with a business emergency (e.g., flood, robbery, lawsuit) To secure a business line of credit, you will need to apply (just like you would for a traditional loan), and the lender or institution will establish certain conditions. If you are approved, you will be given a maximum expense amount that can go from $10K to $1M depending on the institution.
Credit lines normally differ from business to business. But, as a rule of thumb, you will have in between 6-18 months to pay back the cash you withdrew. The bright side is that, similar to a credit card, you just need to pay back the cash you invest. However, keep in mind that interests can be high, ranging from 7%-25%. Interested in getting a business grant? Check out our article HERE! Requirements for a Hair Salon LoanDepending on the type of loan you are applying for, the amount of funding you need, and your salon’s history, you might be requested to surrender different documents or information. Nonetheless, when applying for the average hair salon loan, you will be asked to present: • Bank statements The vast majority of lenders will ask to examine your salon’s most recent bank statements to analyze its revenue flow. If your business is new or has no previous history, financial institutions will request to see your bank statements. • Tax returns Lenders will also request to look at tax returns to feel your salon’s annual profits. Like with bank statements, if you have no sufficient history or your salon just opened, lenders will ask to see your tax returns.
- Credit score Additionally, many banks will likewise consider your salon's business credit report and the owner's credit report; in this case, you. Know that credit score plays a huge part in whether your loan gets approved — even more so if your business is just starting. • Business plan When seeking loans from banks and credit unions, you will be requested to present a business plan. Thus, make sure you have a clear, concise plan to show and that you pay particular attention to the financial projections as lenders will rely on those forecasts when determining whether or not your salon can bear the loan. Other Financing Options for Hair SalonsIf you do not qualify for a loan, do not get discouraged. Traditional business loans usually have a 67% approval rate, while SBA loans and credit lines have only a 52% approval rate. Thankfully, there are other ways in which you can secure the capital you need to fund your hair salon, such as: • InvestorsInvestors are starting to recognize that the beauty industry, and more specifically, the hair salon business can be very profitable. And thus, today, it is very common for venture capitalists and angel investors to be interested in loaning you the funds needed to open or expand your salon.
For that reason, we recommend you begin investigating possible prospects and begin emailing them. It may appear odd, but according to Forbes, "e-mails have actually shown to be able to get the attention of noteworthy angel financiers and VCs." Additionally, e-mails have actually even been accountable for the launch of noteworthy start-ups. • Crowdfunding Starting a crowdfunding campaign is another way to acquire the capital needed to fund your hair salon. Crowdfunding sites have become increasingly popular in the last five years and have proven to be an excellent way to raise substantial amounts of money in a short time. But fees can add up! Hence, make sure your campaign is worth the cost. We suggest you research sites that are secure and popular such as Kickstarter, Indiegogo, GoFundMe, and Lending Club. And based on your needs or wants, select the one that will benefit you the most. • Accelerators Although applying to an accelerator program is usually for startups, most accelerators always have an open invitation for applications from committed entrepreneurs who want to succeed. But, know that this type of program usually offers modest amounts of money.  Hence, depending upon the quantity you need to advance or open your beauty parlor, it might or might not be the best suitable for your business. Related Questions1. Can I apply for a personal loan for my hair salon business?Yes! According to recent statistics, you need at least a 580 credit score to qualify for a personal loan. This is a loan you can then use to fund your hair salon business. Nonetheless, there are two crucial things to consider. First, you need to know that personal loans are regularly smaller than business loans, ranging from $1,000 – $50,000. And also, asking for a personal loan to fund your business could negatively affect your credit score. 2. Is it smart to ask for money from investors to fund my business?There are many ways in which you can secure capital for your business. Investors are usually the most common financing option as they might offer heftier funding than loans — especially when starting a business. However, they might not be the ‘smart’ or ‘right’ choice for your business, given that you could lose the majority ownership of your company, they tend to be very volatile, and they could potentially represent a substantial long-term cost. To learn more on how to start your own salon signup for my free newsletter with tips on how to get salon success as well as download my free eBook here. Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
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