Loans For Beauty Salons
Whether it's for managing staff, offering better products, or getting new clients, a small business loan could help your beauty salon get results and reach its goals.
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Beauty salons and spas require a steady stream of working capital to keep their operations running smoothly. In addition to the costs of starting a salon or spa business, the day-to-day expenses of running a small business could leave a business owner wondering how to navigate short-term gaps in cash flow.
That's why so many beauty salons lean on financing as a way to get around their high operating costs.
How could I use business loans for salons?
Some salon owners take out a single business loan or may apply for a business line of credit to facilitate stronger working capital. A small business loan provides a lump sum upfront, whereas a business line of credit is available to draw individual loans from up to the line amount. Others use a beauty salon loan to help cover costs, such as:
- Rent for business premises
- Equipment for stylists and technicians
- Resources for hiring and training employees
- Beauty products for resale or use in a salon
- Marketing and advertising efforts
What are some of the funding options that are available for beauty businesses?
A salon's business goals can inform what type of financing they need. Here are some options:
Small business loans
Small business loans are traditional installment loans for small businesses of all types, though some lenders may have restrictions by industry. With set loan amounts and repayment terms, some lenders may offer loans with a straightforward application process, quick approval, and fast financing.
Small business loans come in two main types:
- Secured loans often offer flexible credit standards to qualify and may offer lower interest rates. This type of loan always requires collateral. The term "collateral" refers to assets borrowers pledge to secure their loans. If a borrower doesn't make the loan payments, the lender can claim the collateral.
- Unsecured loans typically require a relatively higher credit score for approval. Interest rates may be lower than for credit cards or personal loans. This type of loan doesn't involve collateral.
Beauty salon owners might choose a small business loan to obtain a specific amount of funding in a short timeframe with a predictable monthly payment. This type of loan could be used for working capital or other business purposes.
Business line of credit
A business line of credit allows a small business to borrow funds, up to a credit limit, on an as needed basis. The borrower may repay the borrowed funds and borrow them again as long as the credit line remains open.
A business line of credit may offer an easy application process, quick approval, and immediate funding. Rates and repayment terms vary.
Beauty salons could use a small business line of credit for many purposes. Examples include smoothing cash flow; managing seasonality; handling unexpected expenses; expanding their premises; adding new product lines; attracting new customers with marketing or ad campaigns; and launching an online sales channel.
Beauty salon equipment financing
Equipment financing is a special type of small business loan or business line of credit that's intended for owners who need to purchase, upgrade, repair, or replace equipment to run their business. This type of financing is common for beauty salons because they can't operate without salon-specific equipment and furniture that may be costly to buy and maintain.
Examples of salon equipment include:
- Reception desks and seating
- Styling chairs
- Shampoo chairs
- Manicure and pedicure stations
- Spa treatment tables
- Utility carts and trolleys
- Retail display shelves
- Mirrors
- Lighting
- Supply cabinets
- Washing machines and dryers
Equipment loans enable beauty salons to purchase new or refurbished equipment without using working capital that's needed for other purposes. Equipment loans may offer attractive rates and flexible payment terms.
SBA loans
SBA loans are small business loans offered through lenders and guaranteed, in part, by the U.S. Government's Small Business Administration (SBA). The SBA guarantee means that if the borrower doesn't make the payments, the SBA is responsible for repaying part of the loan amount to the lender. Because of this guarantee, lenders can offer SBA loans with attractive rates and terms.
Beauty salons can use SBA financing to start or expand their business, obtain additional working capital, refinance an existing business loan, purchase business equipment, or acquire commercial property for business purposes.
Loan amounts, rates, and repayment terms for SBA loans vary, depending on the type of loan the borrower chooses.
Requirements for beauty salon loans
Before applying for a beauty salon loan, salon owners should research the requirements lenders may have for approval. Requirements vary, depending on the lender and type of loan. In addition to personal and business credit scores for the beauty salon and the owner, lenders may also consider business plans, financial statements, the owner's experience, and how long the business has operated, among other factors.
Research lenders
Salon owners may want to research a number of lenders before they decide where to apply for a beauty salon loan. When deciding between lenders, business owners can pay attention to the types of financing available, each lender's reputation, financial capacity, and the lender's ability to approve loan applications and make funds available quickly before deciding on the best fit for them.
Gather documentation for a beauty salon loan
Before applying for a beauty salon loan, collect the documents needed for the application. This may include copies of business plans, bank statements, personal and business tax returns, operating or business license, or a lease for the commercial premises.
Before applying for an SBA loan, check the list of specific requirements and documentation that's required to meet the SBA's guidelines.
Beauty salon loan credit score requirements
When applying for a beauty salon loan, the lender may review personal and business credit scores. Similar to a personal credit score, a business credit score helps lenders evaluate loan applicants' credit qualifications.
Personal credit scores and business credit scores are measured on different scales, but they both place a lot of weight on payment history. Business credit scores for beauty salons may also include other factors, such as the size of the salon and the length of the salon's credit history.
Finding the right beauty salon financing
Loans for beauty salons will vary by lender, so business owners should be sure to do their research and find a lender who offers the features and loan terms they value. For those looking for a more flexible financing option, an online loan or business line of credit may prove to be the best fit.
American Express offers the American Express® Business Line of Credit, and you can click here to learn more. Note that the American Express Business Line of Credit may have different eligibility criteria, terms and features from the lending products that are discussed above in this article.
Explore Business Financing
Looking for financing? Check out American Express® Business Line of Credit.
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