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Owning a medical spa is a highly rewarding experience. Each day is another new opportunity to help make others look and feel great. But, it costs a great deal of money to keep a high quality medical spa open to the public. Between government and health regulations, medical malpractice and liability insurance, and the demands from customers to keep adding new services ­– a medical spa requires a constant source of income to keep things running smoothly. Making good financial decisions is a huge part of staying in business. Is your medical spa in need of a business cash flow makeover? Might a business loan for medical practices help?

THE MEDICAL SPA BUSINESS IS EXPLODING IN THE USA

People come from all over the world to heal their bodies and minds in the tranquility of a medical spa. It’s a booming niche in the medical and luxury spa services industry that feeds the increasing need of Baby Boomers to stay youthful. There has also been a renewed interest in medical spas that cater to weight loss and fitness, made popular by television programs like “The Biggest Loser.” On top of this, both women and men are flocking to med spas in luxury hotel chains for laser hair removal, Botox, and skin resurfacing treatments at an increasing frequency.

According to a report from Marketdata, published in a press release, it’s been estimated that the medical spa industry in the US hit $3.6 billion in 2016, and it’s expected to keep growing at a rate of about 18% per year. Isn’t it worth it, then, to make sure your clients have the absolute best possible experience by having a source of ongoing capital?

SMALL BUSINESS LOANS VS. MERCHANT CASH ADVANCES FOR MEDICAL SPAS

Getting financial resources to expand or enhance your medical spa is not as complicated as you may think. There are several choices, including taking out small business loan or requesting a merchant cash advance. Which is better for your medical spa – a business line of credit or a merchant cash advance? Let’s consider the pros and cons of each choice.

SMALL BUSINESS LOANS — PROS AND CONS

As with any financial product, there can be pros and cons with small business loans, including:

Pros

  • The ability to borrow a larger sum of money to purchase medical spa equipment or expand services
  • Flexible, long-term repayment terms that allow you to stretch the expense over years
  • Lower industry interest fees depending on credit history and the loan terms

Cons

  • More chance of being asked to submit to a credit check and provide business financial reports
  • Must be careful to make all small business loan payments on time on a regular basis
  • Qualification is subject to earning a certain amount of revenues each month

MERCHANT CASH ADVANCES – PROS AND CONS

There can be various pros and cons with merchant cash advances too, which may be:

Pros

  • Fast access to cash when needed to fund business expansion, hire ne staffers, or make updates
  • Ongoing, steady supply of funds based on average revenues and credit card transactions
  • No credit history check and bad credit is generally accepted

Cons

  • Must already have a relationship with a secure merchant credit card payment vendor
  • Subject to credit card charge backs and other credit card processing fees
  • Repayment starts immediately with each future credit card transaction

Hopefully, this gives you some idea of the kinds of things you will need to ponder as you decide between a small business loan and merchant credit card advance for your medical spa.

HOW CAN I DECIDE IF A SMALL BUSINESS LOAN OR A MERCHANT CREDIT CARD ADVANCE IS RIGHT FOR MY MEDICAL SPA?

Each medical spa is run differently, so there are a wide range of financial aspects of deciding to apply for a business line of credit or a merchant cash advance. Many medical spas combine a team of medical practitioners with estheticians and massage therapists, and each have different ways of billing clients. Some accept private health insurance and health savings accounts for certain procedures, if they are deemed medically necessary, while other medical spas are cash only. There may be a combination of pending claims and upfront payments, while some spas may also offer discount programs or the ability to pay by credit card.

If you have a large amount of money tied up in medical claims and equipment at your medical spa, a small business loan may make the best financial sense at this time. You will be able to borrow more money and have a longer time to repay it. Interest rates are determined by each loan product, but with a medical group such as yours, credit scores may be in the high range and the interest will be next to nothing. Repayment dates and amounts can be flexible and you won’t have to put any collateral upfront. There’s even early payoff benefits you may be entitled to take advantage of.

If your medical spa has a reliable merchant credit card processing vendor and you earn much of your business through this route, then a merchant cash advance may be the right choice for your business financials. This can also be a good option if you do not accept medical insurance and only accept clients who pay in advance for services. A merchant cash advance will be determined based on the average monthly revenue your spa brings in during a 3-month period. You would be wise to apply during your high volume months to obtain the largest cash advance, then start booking your guests heavily for the next several months. Your repayment doesn’t begin until you start processing new credit card payments, and then it’s just a small percentage of each payment plus processing fees. This is a carefree way to obtain the working capital you need for your medical spa.

THE BEST OF BOTH WORLDS – A MEDICAL SPA BUSINESS LINE OF CREDIT AND MERCHANT CASH ADVANCE

Of course, you may also choose to combine a small business loan with a merchant processing loan program for your medical spa. This can be a positive way to keep the books balanced, while adding more features to your spa that will attract more high-end clientele. You will experience better profits without sacrificing your own resources in the process.

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