Beauty salons are unique businesses. They combine both the retail and the service sectors. Patrons come over to your salon to get their hair done. They can also purchase supplies from you if they want to do it themselves at home. Combine those with the ideal location, and your salon is on its way to phenomenal success!
You might want to consider getting a loan for beauty salons at this point. Success always comes with additional capital requirements. You can partially fund your expansion with personal funds. However, loans can provide you with the exact amount that you need to grow your salon business.
Capital growth is but one purpose that loans serve. There are many reasons or situations in which getting a loan from 1West may be ideal for your salon business.
How Salon Owners Can Use a Business Loan
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Here are a few situations in which taking a business loan can help out salon owners. Take note of these loan purposes so that you’ll know when you need a loan and how you can use them to benefit your business.
Salons rely on specialized equipment to provide services to their clients. These utilities and hardware, however, succumb to wear and tear. You’ll find your business needing to replace existing equipment sooner or later especially if your salon is very popular.
It’s not always a good idea to purchase new equipment for cash. It will leave a void in your cash reserves, and alter your cash flow. It’s better instead to take out a loan to finance your acquisition and stagger the payments over several months.
Hire More Stylists
Specialists like hairstylists are good at what they do. They are at their best when they’re taking time to apply their skill to a client’s demand. Mistakes happen when they are forced to rush through their services. You will experience a bottleneck when your business has grown a significant client base, but it’s not a good idea to overwork your stylists.
What you can do is take out a loan to finance the salary of additional stylists for a few months. Hiring more stylists will preserve the quality of your services. Growing your employee base takes the pressure out of the equation and, by extension, allows your stylists to focus on giving their best for every customer.
Purchase Real Estate
One sign of a beauty salon’s popularity is having multiple locations. Opening a new location allows you to extend your service to a new area. You also make it more convenient for your existing patrons if they live close to your new branch.
Real estate, however, is a very expensive undertaking. Like equipment, you should not purchase new space for cash even if you can afford it. A loan will be very ideal in this circumstance.
Run a Marketing Campaign
Marketing is very important. It’s the only way a salon owner can reach out to potential clients and make his business known. However, small businesses like salons end up working on a reduced budget for advertising because of cash flow constraints. They’re missing out on new business when they try to hold on to every buck in marketing.
The Small Business Administration recommends that marketing should take up to 8% of an enterprise’s revenue. This is for businesses that earn less than $5 million every year. As mentioned earlier, cash flow restraints force these businesses to allocate only a small part of the pie to marketing. A business loan can help out in this case.
Types of Business Loans for Beauty Salons
Here are the options that you have as a beauty salon owner for business loans. Each of these plays a different purpose in your business.
This business loan disburses funds specifically meant for purchasing new equipment for your salon. You cannot use this for any other purpose because the lender will secure the loan with the gear you’re buying.
Equipment loans save both you and the lender from the risks associated with loan defaults. The lender gets to recoup the loss from non-payment by repossessing the hardware. You, on the other hand, will not need to risk any more assets as collateral because the new equipment serves that purpose.
Revolving Business Credit
A revolving credit line assigns you a specific amount that you can borrow on demand. You don’t have to take out the entire credit line if you don’t need to. This leaves you credit that you can draw from if another need arises. When you pay off the initial loan, your credit line gets replenished as well.
You can use this credit to purchase new stocks for your retail corner. You can also use this to purchase inexpensive equipment like electric clippers, scissors, hairdryers, brushes, and razors.
SBA loans are financing that the government secures through the Small Business Administration. These loans offer high credit limits with flexible and affordable repayment terms. The shortest term is at least 7 years, while minimum credits could go up to $1 million. The SBA offers these loans through accredited lenders.
SBA loans can be used to invest in a new location, and for debt consolidation. They offer very high amounts, so they can also be used to purchase inventory and new equipment.
Working Capital Loans
Working capital loans are short-term financing designed to boost your cash flow. These funds cover operational expenses when the cash flow is too thin or is insufficient. You can use these to pay for leases, employee salaries, and loan repayment terms.
Working capital loans are unsecured, and lenders require a good personal credit score. Weigh your options and cash flow carefully before taking out this type of loan. It will reflect on your personal credit score, and not the business’ credit profile if you do miss out on payments.
The Bottom Line
Beauty salons have access to several options for financing if ever the need arises. Their proprietors need not worry about cash flow if a sudden need to buy new equipment or new commercial space appears in their midst. They don’t have to fret about their employees’ wages at a time when cash flow is lean or shaky.
Each form of financing available for beauty salons has its own perks and purposes that they serve within the business. Salon owners must develop an intimate knowledge of these options ahead of time. They can save themselves a lot of time and stress when they know who to approach for loans when they need to.