For many people, opening a beauty salon is a dream come true. You get to mix the excitement of helping your clients with the challenge of running a business. But, as with any business, you will face several challenges that you need to overcome. For most firms, obtaining reasonable funding is one of the most pressing challenges.
If you want to start a beauty business, you need as much budget as you can. As a beauty expert, you’re aware of how expensive a product or equipment can be. And, if you want to offer high-quality services, you can’t afford to settle for cheaper options.
Most business owners do not have a lot of budget in their pockets to run a business. That’s where beauty business loans come in handy. This article highlights different lending options for business owners in the beauty industry. You will also learn why your salon needs business financing.
Personal Vs. Business Loans: Which Is a Better Lending Option for Your Business?
If you’re a start-up company, your best choice for funding your business is a personal loan. There are plenty of reasons why that is the case. But, if you are an established beauty business wanting to step up your game, apply for a small business loan.
Having a small business loan support gives you more benefits than personal loans. With business loans, you can separate your personal and business expenses. This is an important factor to consider before applying for either type of loan.
If your business experiences financial issues, business loans can reduce your personal liability. This means that you can protect your personal assets even if you have unpaid business debts. It also helps to have a separate business account that you use solely for business purposes.
Applying for a small business loan also helps you build your business credit history. A good credit score gives you a lot of opportunities that are important for business growth. Your credit score determines whether lenders can trust you with their money or not. With high credit scores, you can get an offer of higher spending limits.
These days, businesses with no or bad credit history can apply for bad credit loans. This is important, especially for start-up businesses. If you are a new business owner, you will find these bad credit loans helpful to get your business started. This way, you will be able to build your credit history for better lending options in the future.
Why Do You Need Funding for Your Beauty Business?
Apart from products and equipment, you can use business loans to hire employees. To attract highly-skilled applicants, you need to offer them a competitive salary range for which funding will come in handy.
You can use these loans to perform your advertising and marketing strategies. This will help you grow your business and achieve the success that you want. As a new small business owner, it will be difficult to afford such expenses.
In fact, issues with cash flow management are the leading cause of small business failure. That’s why having access to loans is important, especially if you face a financial emergency.
It’s not easy to get approval for business loans. But, they are the best option for small business owners in need of sizable working capital. Small business grants have very competitive offers and are usually flexible. This means that you can borrow large or small loans, depending on the needs of your company.
There are a few aspects to consider in the case of salons. These will help you determine if you need to look into business finance or not.
- Are you able to handle your expenses on your own? You should never take out a loan unless you need it. Taking on debt is a huge responsibility. If done wrong, it can destroy your beauty business.
- Do you have a recurring or one-time funding requirement? Do you need help with cash flow gaps, or are you looking for funding for a single, large project?
- Do you have seasons with highs and lows? Some businesses experience certain seasons of the year that are busier than others. If that is the case, you have different demands than those that have constant earnings all year.
- How soon do you need financial assistance? There are times when you will need immediate financial access. But if you are planning on having changes without a specific deadline, you will not need immediate assistance.
- Do you prefer cost-effectiveness or flexibility? Some business loan options are flexible, but they may also come with higher interest rates. You need to look into the offer carefully before you proceed with applying for a loan.
Lending Options to Fund Your Beauty Business
Now that you understand all of that, it’s time to figure out which option is right for your salon.
- Term Loans
When you think of a business loan, you typically think of a term loan. With this option, a lender gives you a lump sum of money that you repay over a fixed period. You can have repayment periods of a few months or you can have them in decades.
Term loans are suitable for long-term projects that need funds and will take time to repay. Some of these include expanding or renovating your salon.
Benefits include:
- Has lower interest rates
- Provides flexibility
- Offers quicker loan approval
- Funds short-term and long-term projects
- Business Lines of Credit
With a business line of credit, the lender gives you access to funds that you can use at any time. If you qualify for a line of credit, you can keep it until you’re ready to use it and you won’t have to pay anything.
Business owners view lines of credit as a high-value option because of their flexibility. They are a great way to get emergency cash if you are having cash flow problems.
Benefits include:
- Provides cash flow during slow seasons
- Gives access to purchase benefits
- Allows you to pay only the amount you used
- Credit Cards
Another type of business loan is a business credit card. They work like short-term loans with the bonus of reward points that can be re-invested in your company.
You can get credit cards with a 0% introductory APR. This means that you pay zero interest on your purchases for the duration of the promotional period. With business credit cards, you can have no interest in expenses like inventory and marketing campaigns.
Benefits include:
- Improves cash flow
- Can get you company-specific benefits
- Allows you to control employee spending habits
- Equipment Financing
Earlier, the article mentioned how most salons have a lot of expensive equipment. From chairs to sinks to beds, you need small business loans to buy or replace old equipment. Additionally, any damage or destruction to any of these can result in a loss of revenue.
With this sort of financing, lenders will let you use the funds to get a piece of equipment. The loan is self-secured, in the sense that the equipment serves as collateral. This means that if the borrower defaults on payments, the lender can confiscate the equipment as payment.
Benefits include:
- Helps businesses with bad credit
- Improves cash flow
- Improves business productivity
- No collateral needed
- Protects you from equipment price inflation
- Helps you save on tax
Bottom Line
There are no shortcuts to applying for a small business loan. It will be up to you to place your salon in the best possible position to get the finest available products. Some good lenders and small business grants will give you conditions that are beneficial for both parties.
Fortunately, you have a variety of feasible alternatives. These lending options are great for establishing your salon or taking it to the next level.