Beauty salons must continuously evolve to survive in this massively competitive industry. Growing means maintaining a pristine appearance, offering new products or services, and never turning away potential customers.
However, staying competitive in the beauty industry would be much easier if the demand weren’t difficult to predict. And just when you think you’re ready to expand your offerings, essential equipment might break or become outdated. United Capital Source can solve these common dilemmas with highly accessible and versatile Beauty Salon Business Loans.
Beauty Salon Business Loans are geared toward the cash flow cycles and periodic expenses of beauty and wellness businesses. In addition to covering short-term needs and larger purchases, these business loans can bridge temporary revenue gaps until demand picks back up.
Beauty salons can access various loan options, including SBA loans, equipment financing, lines of credit, and short-term business loans.
Beauty Salon Business Loans can come in the form of:
Each product listed above can suit a different expense or cash flow issue for beauty businesses. For example, beauty salons are especially prone to temporary, occasional dips in revenue. Demand can rise and fall at any moment, so beauty salon financing options should be diverse and flexible.
Positive cash flow is essential for salons to meet regular expenses, including rent, utilities, and staff salaries. Lenders consider factors like monthly revenue, time in business, and solid financial records when evaluating loan applications for salons. The credit score required for a salon business loan typically starts at 600, with higher scores providing better terms.
This situation best suits a Working Capital Loan or Business Line of Credit. Borrowing amounts for Working Capital Loans are directly based on your operational expenses. Thus, if you’re looking to get through a rough patch lasting a few months, a Working Capital Loan can allow you to continue serving your customers as usual.
On the other hand, a Business Line of Credit is more cost-effective if you’re looking to cover operational expenses for a much shorter period or secure a moderately priced one-time expense. Examples of such costs include extra supplies, inventory, or new equipment. You’ll pay less interest on a line of credit if you pay off the full balance as quickly as possible. These flexible financing options allow you to move with the latest beauty trends.
Seasonality affects the revenue of many beauty salons, with peak periods during holidays and wedding seasons. In these cases, revenue-based funding, such as a merchant cash advance or revenue-based loan, would be most beneficial. Revenue-based financing provides a flexible funding option where repayment is based on a percentage of the salon’s monthly revenue. Revenue-based financing allows repayments to be based on a percentage of the salon’s monthly revenue, making it flexible for cash flow management. Repayment schedules for some loans can adjust based on the salon’s revenue to ensure manageability during slower months.
For more substantial investments like new salon equipment, you might consider a Business Term Loan, an SBA Loan, or Equipment Financing instead. These products carry higher borrowing amounts and longer terms, which are ideal for launching new services or purchasing new product lines to sell.
SBA loans, backed by the U.S. Small Business Administration, stand out among small business loans due to their favorable terms. Because they are government-backed, SBA loans may have lower interest rates compared to traditional loans. SBA loans also typically have steady monthly payments and long repayment terms. Salon owners can use this loan program to purchase equipment, expand operations, obtain business licenses, and more.
If you’re looking to start small with either strategy, we can customize your borrowing amount and terms to ensure you don’t take on more debt than you can afford to pay back.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Beauty Salon Business Loans allow beauty salons to grow and stay competitive despite their rocky cash flow and sizable periodic expenses. After all, increasing revenue is one of the most logical ways to balance out cash flow issues.
Research has shown that upselling current customers makes more financial sense than trying to gain new customers. Beauty salons can accomplish this by selling relevant products to customers who have just received their usual services. Business loans can fund salons’ consistent purchase of inventory while demand fluctuates and other expenses arise.
Another option is offering new services, which will require additional employees or certifications for existing employees. Rocky cash flow can also make it challenging to keep a sufficient number of employees on staff throughout the year. But if you don’t have the staff to take appointments from new customers, they will give their business to the many other salons in the area. Business loans can ensure you always have enough staff to make appointments, even when demand drops temporarily.
Lastly, it’s important to note that borrowers can access most of the six business loan products mentioned above with subpar credit. Women typically own beauty salons. The average woman’s credit score is approximately 25 points lower than the average man’s. Beauty Salon Business Loans can help female business owners pay off existing debts or get current on other payments to raise their credit score.
Extra debt is always a risk for businesses naturally prone to cash flow issues. Choosing the wrong repayment structure or borrowing the wrong amount could do more harm to your cash flow than good. These decisions are even more difficult in industries with unpredictable demand. How can you possibly know when the right time to apply is?
Major expenses also tend to create other costs. For example, let’s say you’ve just used a business loan to purchase new equipment and to offer new services. But what if none of your employees have experience with these services or are not certified to provide them? What if you don’t have enough employees to handle the increased responsibilities (i.e., confirming online appointments, selling products, providing new services)?
And even if you hire more employees, you must ensure they receive sufficient training and possess the right personality for the job. Using a business loan for hiring can cause you to speed up the interviewing and training processes. This is why many businesses end up borrowing too little. They forget that new hires don’t always contribute to revenue immediately, and finding the right personality for the job can take much longer than expected.
The amount of paperwork required depends on the product you choose. Funds can be approved and distributed for most products within 1-3 business days. Here’s how to apply:
The first step is choosing the most sensible solution to the problem at hand. This should require some research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term expense? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Here are the documents and information required for Beauty Salon & Spa:
SBA Loans require additional documents and information, such as financial statements. To learn what’s needed for the SBA-backed loans, visit our SBA Loan page.
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
If you’re approved, we’ll contact you within 24 hours. After closing, funds for most business financing products should appear in your bank account within 24 hours to one week.
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
If your application is declined, it’s possible that you applied for the wrong product to meet your cash flow needs. In this case, we would likely recommend a different product with a less hazardous repayment structure.
Your application might also be declined if it is determined that you cannot afford to take on more debt at this time.
If your credit score is holding you back from accessing financing, consider working with a reputable credit repair service to raise your scores.
The beauty salon industry can be challenging. Running a successful salon requires flexible funding solutions to overcome various challenges. Salon loans can cover the costs of hiring top talent from competing salons, and working capital solutions can provide financial protection during slow periods.
Business loans are available for all sorts of salons, including (but not limited to):
Credit approval depends on where you apply and the product you have in mind. If you’re looking for a bank loan, you’ll need excellent credit, perfect cash flow, collateral, plenty of money in the bank, high annual revenue, and at least two years in business. Online lenders typically offer more accessible funding solutions.
Products from companies like United Capital Source are much more accessible. Your ability to meet the abovementioned requirements will determine your borrowing amount, rates, and terms. But falling short in any (or more than one) of these areas won’t stop you from qualifying for multiple products. With some products, your credit score is practically irrelevant. For example, eligibility for a Merchant Cash Advance is based entirely on the size and volume of your debit and credit card sales.
The credit score required for a salon business loan typically starts at 600. When evaluating loan applications, lenders consider the time in business, typically six months or more. They also evaluate other factors like revenue and financial documentation to determine loan eligibility. Most lenders assess cash flow and financial documentation when deciding on a salon loan application.
Salon owners face challenges due to high operational costs, making securing financing difficult. A limited understanding of the unique needs of salon owners can also hinder their access to financing. Traditional bank loans, despite not being specifically designed for beauty salons, provide a range of financing options that can cater to salons’ needs.
However, qualifying for those loans is much more difficult. In addition to personal and business credit scores, lenders may also consider business plans and financial statements when approving a loan. Necessary documentation may include bank statements, tax returns, and a business plan.
Most traditional lenders only consider options for an existing salon. Salon owners typically need a high personal credit score, which can also yield lower interest rates. These loans also require extensive documentation, such as business tax returns and financial statements. This means preparing profit and loss statements, which can be time-consuming.
In addition, getting approval and funding can take a long time, even if you qualify. So, you might not get funding to solve an urgent issue or cover time-sensitive expenses. These challenges aren’t unique to beauty salons—many small business owners struggle to get traditional business financing.
For some salons, their biggest challenge is the constant need for new equipment or supplies. For others, it’s the ups and downs in demand or the post-holiday slump. A business line of credit can solve both of these common dilemmas.
This is the perfect business financing tool for businesses that face sporadic and unpredictable cash flow issues. You can draw from your credit line at any time, and once you pay back what you borrowed, that money becomes available again. Thus, you don’t have to continuously apply for funding whenever demand drops or a new expense arises.
A Business Line of Credit is best for businesses that need a little extra cash here and there, instead of companies looking to finance large-scale investments. Another consideration is ensuring loan payments align with your revenue.
Loan terms vary by type and lender, with repayment periods ranging from months to years. Many lenders require a minimum credit score of 600 for beauty salon loans. When deciding between lenders, business owners can consider the types of financing available and each lender’s reputation.
The only Beauty Salon Business Loan that typically requires collateral is Equipment Financing. You would be using the equipment as collateral to borrow an amount roughly equal to the equipment’s value. And when we say “roughly,” we mean “slightly lower.” After all, the business loan provider probably won’t sell the collateral for the same amount at which it was purchased. For this reason, $10,000 worth of collateral might be able to get you a $6,000 – $7,000 loan.
While collateral is not required for the other options, providing it may offset issues with credit or cash flow that would have otherwise resulted in higher rates or lower borrowing amounts. But, before assuming you can provide collateral, contact the business loan provider to make sure your type of collateral is accepted.
Yes, five out of the seven products mentioned above are accessible for borrowers with bad credit. Your rates may be higher, and your terms may be shorter because bad credit makes you more likely to default. However, if you have strong cash flow or can provide collateral, your bad credit may have less impact on your rates and terms.
The only two products that are not accessible with bad credit are Business Term Loans and SBA Loans. These products carry high borrowing limits, low rates, and long terms. The other five products usually carry shorter terms and are much easier to repay. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
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