Salons can offer a fabulous business opportunity. But owning a successful salon requires steady cash flow that supports all components of the business: a talented staff, ongoing training, a constant new supply of beauty products, and the ability to offer the best experience possible to your clientele.
It can be a juggling act. If you have dreams of growing or expanding that business, you probably will require a salon small business loan to make it happen.
The first step is to find a business loan you will qualify for as well as one that fits your unique needs. But, heading to your bank may not be best or easiest path to success.
The Big Banks
Since the downturn in the economy in 2008, banks began to focus more on big business needs. According to Forbes.com, most small businesses, like salons, don’t meet the tough lending criteria and owners who have less than perfect credit are being forced to seek funding outside of the bank.
The challenges include:
Banks often consider a salon business a high risk. In turn, they demand collateral, guarantees, and good credit to qualify.
Traditional banks typically will decline a loan if your business records demonstrate decreasing sales, low cash flow, or if you lack collateral or a significant amount of managerial experience.
If your business is new, or a start-up, approval can be almost impossible to get. According to Foxbusiness.com, many banks turn away requests for a start-up loan because they require three years of business financial data to be provided.
The application is typically rigorous. A very detailed business plan is required as well as analysis of your competition and your marketing plans.
There are other options for a small business loan available. According to entrepreneur.com, nearly two-thirds of all small businesses, like salons, seek alternatives to bank financing. The key is finding the one that fits your needs.
Loans for Salons: Two Better Solutions
Savvy salon owners know that sometimes you need to get creative and think outside of the box. This is where alternative lenders fit into your plans.
Alternative lenders offer loans for salons that fit your business and keep your needs in mind. Interest rates may be slightly higher than a bank, but are outweighed by the benefits, which include:
Typically, the application process examines the overall health of your business and what you have built. In other words, your credit score and length of your business history is usually not the primary focus.
Alternative lenders often have the flexibility to offer several loan products, one of which will meet the needs unique to your business.
Applications are usually very fast, easy and provide you the money you need quickly.
Lines of Credit
A Business Line of Credit is an option where a lender lets you borrow money up to a specified amount, similar to a credit card, but with better interest rates. You borrow only what you need from that line of credit and your interest is based upon the amount you borrow, not the full line of credit available. A Business Line of Credit is typically unsecured by any collateral and does not offer long repayment time-frames.
Why Consider Loans for Salons?
Taking out a loan for your salon operations will allow for expansion and growth. Typically you can use the capital for any reason, such as expanding your business, upgrades to your current salon, hiring more staff, specialized training classes for the staff, or to even to cover daily operations during a slump, or even to pay taxes.
All that you put into the business now are the seeds for a more successful tomorrow. For example, training classes for the staff is an indirect way hair salon business loans can help you generate revenue. Staff training is costly. But, if your staff improves their skills and learns the latest trends, clients will respond by returning for continued service and refer others to your salon. The result is increased revenues in the near future.
The right funding solution is one that understands the nature of your business and supports its growth. To learn more about loans for salons and alternative funding options, contact Credibly today!