Barbers and stylists who own their own salon need financing to assist with short term working capital like expanding the amount of chairs and investing in retail products for added revenue. The best beauty salon loans provide fast access to financing for owners that have been in operation for 1year and also therefore are prime borrowers.
OnDeck, that sponsored this guide, provides a small business line of credit that may help your salon cope with seasonality, unpredictability, and also invest in development. You will be eligible if you have a 600+ credit rating, $100,000+ in annual revenue, and 1 year or even more of business background. Their online application takes about ten minutes and you are able to get funded in as quick as 1 day.
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Best Beauty Salon Loans in a
| Best For | |
|---|---|
| Business Line of Credit | Salons that require a recurring working capital solution to Manage seasonality or cash flow openings. |
| Short Term Loans | Quick growth capital or to help prepare yourself for busy seasons. |
| Business Credit Cards | For many stylists to cover little daily expenses such as styling or inventory gear. |
| SBA Loans | Salon owners that wish to own their property rather than rent. |
How We Determined the Best Beauty Salon Loans
Salons need financing to satisfy the elastic demands of their business. For example, expanding businesses often have to find stylists to fill their seats, and growth capital can aid a salon invest in new employees and helping hands. What is more, salons are occasionally regarded as a luxury item, and investing in advertising and promotion can drive quality customers into your institution.
These are things that can make an immediate demand for access to funding. But, traditional lenders frequently see the beauty industry as risky, which makes it hard to get salon financing. Further, more traditional loans take some time to finance and are not valuable to salon owners. For these reasons, we looked at alternative online lenders as a great option for barbers and stylists who own their own salon.
When deciding on the best beauty salon funding, we considered these things:
- Flexibility
- Time to finance
- Prices
- Maximum loan amounts
- Repayment provisions
- Qualification requirements
Among the main reasons why a salon owner looks for financing would be to expand and invest in growth. Two excellent ways to do are to bring in fresh stylists (thus raising your capability ) or to raise retail sales and other additional revenue streams. This is the reason why we recommend a business line of credit as the ideal source of funding for salon owners.
Business Line of Credit for Salons
A business credit line (LOC) is not just a loan however is a preapproved amount of money you can draw from over and over again, similar to a credit card. You will only pay interest on the amount of credit you get, so it may be a cheaper solution than other loans if you just need financing in small spurts. Additionally you won’t need to reapply each time you need funding for your salon.
A company LOC is the best fit for your salon since it can help with the majority of your needs, letting you find access to financing on a recurring basis when a cash flow gap occurs. What is more, it may also be used to finance your own salon expansion as a short term working capital solution.
Interest Rates & Charges
The Expenses of a business line of credit for a salon will generally look like this:
- APR: 13.99 — 40%
- Prepayment Penalty: None
LOC Conditions
The terms of a Company LOC will generally look like this:
- Loan Amount: Up to $100,000
- Repayment Period: 6 Months
- Repayment Cycle: Weekly or Monthly
- Time to Funding: 1 — 3 Days
Small Business Line of Credit Qualifications
To Be Able to qualify for a small business line of credit to your salon You Will Need to Satisfy these minimum qualifications:
- Minimum Credit rating: 600 (check your credit score for free )
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $100,000
Individual barbers or stylists who do not have an extremely large book of business ($150,000+) will find it hard to qualify for this or other kinds of financing. You can learn more by reading our guide to some business line of credit.
What’s Missing From a Business Line of Credit
A business credit line (LOC) is generally great for salons appearing to draw from money on a recurring basis as cash flow gaps occur. But a LOC includes a minimal maximum loan limit concerning other beauty salon loans. By way of instance, if you realize you are entering a busy season (like summer) and know you have to ramp up your retail inventory with a predetermined sum, a term attractiveness loan might be better.
Where to Find a Small Business Line of Credit
OnDeck offers a LOC up to $100,000 with prices as low as 13.99% for prime beauty salon creditors. You can get approved by filling out their online application, which takes about 10 minutes. If accepted, you can begin drawing down on your LOC as fast as 1 day.
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Short Term Beauty Salon Loans
A short-term beauty salon loan is a lump sum loan with fixed weekly or monthly amortized obligations of principal plus interest. These loans typically have higher interest rates and short repayment periods of less than 3 decades. A short term beauty salon loan may generally be paid off in 1 year, but you’ll want to reapply each time you require additional funds.
Short-term loans are good option to fund rapid expansion to acquire a new book of business or to spend on marketing or advertising that will grow your list of clients. As an example, you can host a local style show for a fixed dollar amount using a term loan. If you calculate the increase in company will be greater than the amount of the fixed monthly payments, this is a great investment.
Short Term Loan Interest Rates & Fees
The total costs for a short term loan will generally fall into these ranges:
- APR: 30 — 50 percent
- Prepayment Penalty: None
Having a short-term loan you generally won’t spare any money by paying it off first. When you get financed you’ll agree to repay a certain dollar amount based on interest charges for your entire term. So even in the event that you pay back the loan in 3 weeks, you’ll still be paying the same amount as you would if it took you a whole 12 weeks to pay back the loan.
Short Term Loan Terms
Short term loan provisions will generally look something like this:
- Loan Amount: Up to $500,000
- Repayment Period: 3 — 36 Months
- Repayment Cycle: Weekly
- Time to Funding: 1-3 Days
Short Term Loan Qualifications
To Be Eligible for a short term loan you need to meet these minimum qualifications:
- Minimum Credit Score: 500 (assess your credit rating for free here)
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $50,000
What Is Missing From a Short Term Beauty Salon Loan
Short term loans are great to help you grow your salon by supplying a huge lump sum of money to spend on your business. But, short-term beauty salon loans require that you apply each single time you will need funds. Many salons will come across a line of credit which you can draw out over and over again to be a much better alternative because of the variability of their enterprise.
The Way to Find Short Term Loans
OnDeck delivers short term beauty salon loans up to $500,000 and they’re able to fund in as quick as 1 day. You can start the process by filling out an online program where you could get pre qualified in approximately ten minutes.
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Business Credit Cards for Beauty Salons
Company credit cards work just like a business line of credit but they are easier to qualify for and generally take a lot smaller line of salon funding. A company credit card is something which each stylist should possess. You will typically get approved for under $20,000 in financing and can qualify for money back or rewards points to use on purchases inside your business.
A company credit card is best used to create small working capital purchases during your salon’s day-to-day operations. As an instance, all salons have managing costs like utilities and insurance, and you can set up automatic payments on your small business credit card, earning rewards in the process. Additionally, it can even be used to make lump sum purchases because of 30 day repayment provisions and a few cards even offer 0% introductory APR periods, allowing you to float expenses.
By way of instance, if you set $1,000 of retail shampoo on your card, then you can receive cash back that reduces your overall expenses. If you market through that product in just 30 days, you can pay back the amount without incurring interest. Plus, if this occurs throughout your special introductory offer period, you could have 0 percent interest on the purchases, which gives you even longer to market your retail products to clients and recoup the money.
Business Credit Card Interest Rates & Fees
The costs related to a company charge card typically fall into these ranges:
- Interest Rate: 12 — 29%, some have 0 percent introductory offers
- Annual Fee: $0 — $350+
Business Credit Card Terms
The terms of a business charge card will generally look like this:
- Loan Amounts: Up to $100,000 but typically less than $30,000 for many businesses
- Repayment Terms: 30 days interest free
- Period to Funding: Instantly — 2 weeks (time it takes to receive your card)
- Initial Benefits: Introductory APR of 0% for 7 — 18 months or money back in the Event That You spend a certain amount over the first 2-6 weeks
- Ongoing Rewards: Money back on all purchases or points you can redeem for useful rewards
For beauty salon owners, a cash back card could be the best option as a result of its original and ongoing rewards. Many of the cards that offer points are valuable to businesses that conduct a lot of travel or spend a lot on workplace equipment. Using a money back business card helps salon owners lower their operating costs by earning cash back on recurring expenses such as utilities.
Business Credit Card Qualifications
The minimum qualifications for a business credit card would be:
- Minimum Credit rating: 650+ for best offers (check your credit score for free here)
Your business revenue are also a major factor in determining your eligibility to get a credit card.
What Business Credit Cards are Missing
Company credit cards are fantastic for salon owners wanting a small line of credit to help pay for recurring expenses, but they do not offer quite large financing amounts. The most you will probably qualify for as a salon owner will probably be less than $20,000. However, all salon owners must most likely have a business credit card to at the very least save for a rainy day.
Where to Find Business Credit Cards
Company credit cards are provided by banks, credit unions, and credit card businesses. You may learn more about which card may be ideal for you personally by reading our guide that offers the very best small business credit cards. Personal stylists searching for a small credit card to fund their individual needs should rather read our article about the finest personal cards for business owners.
SBA Loans for Beauty Salons
SBA loans are long term loans guaranteed by the SBA which are typically used to buy commercial real estate but are also sometimes used for working capital requirements. An SBA loan offers low interest rates, long repayment terms, and therefore are difficult to qualify for, making them a tough option for salon owners. You’ll need to devote a lot of time and energy on the application process and may not even get accepted.
There are several different kinds of SBA loans to select from. In general, they’re employed by salons to finance buying a commercial property space to operate and grow their enterprise. While hard to qualify, an SBA loan may help you cut back on lease expenses or gain access to your physical location in a prime area which might increase your walk in speed. Further, you simply have to occupy 51% of the space, allowing you to rent the building out to other businesses, even other salons.
Even though SBA loans are generally for established businesses, you might get accepted as a salon startup. Read our informative article on the best way best to get an SBA startup loan to find out more.
Interest Rates & Fees
The prices of an SBA loan will vary by lender but they will generally fall into these ranges:
- Interest Rate: 5% — 10% (check current SBA loan charges )
- Prepayment Penalty: None
- Origination Fee: 0.5 — 3.5%
- Loan Packaging Fee: $2k — $4k
- SBA Guarantee Fee: 3 — 3.5% (Waived if loan amount is under $150,000)
You may find out more about the fees associated with an SBA loan by reading our article on the SBA guarantee fee.
SBA Loan Prerequisites
Terms for an SBA loan will generally look like this:
- Loan Amount: Up to $5 million
- Repayment Terms: Up to 10 years
- Repayment Cycle: Monthly
- Time to Funding: 30 — 90+ times
SBA Loan Qualifications
To qualify for an SBA loan you will need to meet these minimum qualifications:
- Minimum Credit rating: 680 (check your credit rating for free )
- Collateral: Ordinarily required
- Down Payment: 10-20percent
- Time in Business: 2+ Years
The reason that it’s difficult to get qualified for an SBA loan for a salon owner is that while the SBA guarantees the loan, authorized lenders are required to maintain their qualification standards. Many lenders perceive the beauty industry to be risky as a result of revenue volatility. You can find out more about the SBA loan process by reading our informative article about the best way best to apply for an SBA loan.
What Is Missing With an SBA Loan
SBA loans are fantastic for buying commercial property for the salon, but they are difficult to qualify for and will take you away from your salon operations as you go through the application procedure. As a stylist, even if you’re not at your chair or managing your other stylists then you’re not earning revenue. These loans also take a very long time to fund so that it’s not a fantastic fit for short term working capital needs.
Where to Find SBA Loans
Traditional banks and other traditional lenders offer SBA loans. If you are not certain which one to apply through then you can read our article on the top 100 SBA lenders that will help you find the appropriate match.
Common Reasons for Beauty Salon Loans
Salon owners are always having to balance their own book of business as a stylist or barber as well as manage the general salon company. For this reason, salon owners often look for external capital to help them hire different supervisors to run the salon or to employ stylists to take over their book of business.
Additionally, salon owners need capital for situations and things such as:
- Hiring & training new stylists
- Purchasing retail stock
- Purchasing new equipment
- Purchasing shared merchandise stock
- Paying utilities and lease
- Salon advertising
All these motives can be fulfilled with a business line of credit. OnDeck can fund a LOC for salon owners around $100,000 in the event that you’ve got a personal credit score of at least 600, $100,000+ in annual business revenue, and have been in business for at least 1 year. To use you can complete an internet application that takes approximately ten minutes and OnDeck can finance in as fast as 1 day.
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Reasons Beauty Salons Might Be Denied
Beauty salon owners often find it difficult to find the working capital financing they require from traditional lenders and banks. Many of them consider the industry to be unpredictable and too risky to provide a large amount of funds unless it’s secured by property or other collateral. It may even be hard to get approved through an alternate lender if you are not ready to overcome potential obstacles.
The 3 main obstacles that cause stylists to have denied for beauty salon loans are:
1. Bad Credit or Lack of Credit History
Having bad personal credit — or inadequate credit history — is a challenging barrier to overcome with most lenders. When your business is from the beauty industry, it is even more difficult because of the insecure nature of your business. Alternative lenders may accept borrowers with credit scores as low as 500, but the most economical rates are just likely to visit prime borrowers. There are some approaches in which you can build both your personal and business credit before you apply.
In accordance with Ty Kiisel, Editor in OnDeck:
“In case you weren’t looking for opportunities to construct business credit early on in your company’s history, it might hurt you later. Establishing 30- or 60-day repayment terms with providers is a fantastic way to start building company credit (provided they report your good credit history to the credit bureaus), and applying for a business credit card and using it rather than your own credit card to cover business expenses are both methods to start establishing business credit in the first couple of years of business that will demonstrate to a lender that you’re creditworthy.”
While your business credit score won’t necessarily be a factor in approving your loan, it’s a good opportunity to demonstrate a possible lender how your company deals with debt. This can enhance your chances at getting approved or raise the amount of financing you could be approved for.
2. Not Showing Proof of Climbing Revenue
Among the biggest issues salons face is keeping customers long term. Having the ability to show a solid book of business that provides a constant stream of repeat clients is a good way to get a potential lender comfy with your financials. Due to the nature of the salon business, this is something that will be extremely valuable to lenders that want to understand whether or not your revenue is reliable.
To set up yourself to your best chance at being accepted, you will need to show that your earnings is not just consistent however that it’s been rising for at least 3-6 weeks. It is best to be well prepared to apply for a loan once you reach 6 months of consistent revenue growth. This shows a creditor that you are trending in the ideal direction along with your marketing and operations efforts are working.
3. Too Much Competition
Beauty salons have a lot of rivalry, which is just one of the reasons many conventional lenders find the industry to be so insecure. You must prove that you can compete with larger salons and that you’re able to maintain your seats full of clients flowing to the company.
By way of instance, if selling retail products like shampoos and sprays are important to your organization, then you’ll want to show that you can successfully market them in relation to cheaper retail competition that surrounds you.
If your company is trying to get clients because of the rivalry, then it may be time to think about shifting locations. The location of your salon could be crucial to the number of walk ins you receive and how many customers remain with your business for the long term.
Bottom Line
Getting approved for beauty salon loans isn’t simple, but it is doable if you properly prepare and understand where to locate lenders that can finance you quickly. Typically you’ll want to find short term financing for your salon that you may use on a recurring basis so that you have the funds to cope with working capital needs as they come up.
OnDeck supplies a business line of credit up to $100,000 for salons with $100,000+ in annual revenue, a 600+ credit rating, and at least 1 year in business. Their online application takes about ten minutes and if accepted you could be financed in as quick as 1 day.
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