How to Choose the Best Loans for Beauty Salons
- Loan features. Make sure that the loan comes with the amounts you need, as well as acceptable terms and repayment options.
- Application process. Research what information is required during the application process, and how fast you can expect to receive the funds. Will the lender conduct a hard or soft credit score check?
- Interest rates and fees. Take a look at the interest rate range offered. Are there any additional types of charges, such as origination fees?
- Qualification process. How strict are the qualification requirements? Think about your beauty salon’s annual revenue, business history, and minimum credit score requirements.
- Customer support. Research whether the lender provides live customer service, offers multi-channel support, and provides any supplemental tools and information.
- Online user reviews. Go through reviews on independent review websites such as Trustpilot.
- Perks and bonuses. Consider any additional offers like advanced technology, payment flexibility, and advertising transparency.
How Much Does It Cost To Finance a Beauty Salon?
The cost of opening a beauty salon can vary significantly depending on the type of services you provide, your geographic location, the number of employees, and whether or not you have previous clientele.
Be prepared to spend anywhere from a couple thousand dollars to half a million or more on the following items:
- Salon licenses: $500 - $12,000
- Salon equipment: $5,000 - $25,000
- Initial supplies and inventory: $2,000 - $15,000
- Salon branding and design: $0 - $2,000
- Marketing to build clientele: $500 - $5,000
- Legal and consulting fees for starting a business: $50 - $5,000
- Beauty salon loan: 1.25% - 10% of the loan amount
- Salon insurance: $50 - $1,000 per month
- Salon website: $0 - $10,000
- Salon Point of Sale system and software: $0 - $300 per month
- Salon location: varies greatly
When it comes to finding the salon location, you can choose to work out of your own home, rent a space in an existing salon, or lease or buy your own location. When buying a commercial property, you will need $15,000 to $70,000 in cash for the down payment for a property worth $100,000 to $700,000. This will leave you with monthly mortgage payments of $1,000 to $2,000 or more.
What Can Beauty Salons Use Business Loans For?
The purpose of the funding you need will determine the best type of business loan for your beauty salon.
- Start-up costs: If you are only starting out your salon business, a start-up loan can be used to lease a commercial space, hire and train staff, purchase all the necessary equipment and materials, and launch a marketing campaign.
- Commercial real estate: This type of real estate financing can be used if you have been in operation for quite a while and are planning to expand your business to a new location.
- Working capital: This type of loan can be used to finance daily operations of your business, such as marketing and staff wages.
- Business lines of credit. A business line of credit can be used for virtually anything, as long as you stay within the limit and pay off any outstanding balance on time.
How to Qualify for a Beauty Salon Loan?
The qualification requirements vary from lender to lender and from product to product. For example, with traditional banks, you would typically need to have a credit score of at least 650. With alternative lenders, on the other hand, a credit score of 500 may be enough. You would also typically need to be in business for 6 months or more and have annual revenue of anywhere between $100,000 and $250,000.
What Types of Loans Can Beauty Salon Owners Apply For?
There are numerous beauty salon loans for various business situations and different stages your business may currently be in. For example, you can choose between:
Some of these loans are granted based on personal credit score, while others pay more attention to your business history and annual revenue. Certain loans require collateral, while others don’t. The selection is virtually endless.
Without a doubt, finding the best loan option for your beauty salon can be daunting. Now that you have a better understanding of what's available on the market, make sure to carefully go over things like loan amounts, repayment terms, and fees and interest rates associated with lending products offered. Don’t forget to review the qualification criteria and the intended use of funds to confirm that the loan is a good fit for your business. Once you settle on your final choice, gather the necessary documentation and start the application process.
*The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.