Over the past year, small business owners in the hair salon industry have been faced with profound challenges due to the
COVID-19 pandemic. Due to this, many have pursued financing options in order sustain their operations.
Regardless of the reason, if you’re interested in pursuing financing as a beauty salon owner you should define your needs before you start the application process. This is because the financing that’s best for you will depend on what you need the funds for. Plus, in many cases, your lender will need to know how you plan to use the loan.
Once you’ve defined your needs, you can begin researching salon financing more seriously. To help you get started, we’ll review five different ways hair salon owners can use financing. After that, we’ll review the process of researching and applying for hair salon financing.
How Hair Salon Owners Can Use Financing:
1. Hire More Stylists
When you’re understaffed, your hair salon's profitability will suffer. Without enough stylists to
serve new customers, your business’s growth will stall.
In addition, the stylists you do employ will be overburdened with customers, which will hurt the quality of service. In either case, hair salon financing in the form of a
business loan can help you cover the cost of hiring more stylists.
2. Open a New Location
If you want to expand your hair salon business in the long-term, you’ll probably want to open a new location. When that time comes, you’ll need a significant amount of capital to make it happen.
If you’re approved for a business loan, you can use the loan amount to cover the cost of the new space, equipment, employees, and other expenses.
3. Purchase Equipment
From hair dryers to shampoo bowls, reception desks, product display cases, and much more, running a successful hair salon requires equipment. Financing can help you pay for whatever equipment you need to run your business. Plus, if you only need the funds to purchase equipment, you can pursue equipment financing to cover the cost.
In addition to typical hair salon equipment, it's likely that you'll need health and safety equipment to operate during this time. Many hair salon owners are using working capital to pay for face shields, dividers, air purifiers, masks, and other safety measures. If your business currently can't afford these costs, it may be the right time to submit a loan application.
4. Cover Marketing Expenses
While there’s plenty of opportunity for success in the hair salon market, there’s also stiff competition. For this reason, your marketing is often a key component of your long-term success.
Despite this, salon owners often skimp on their marketing budget because they don’t have the necessary funds in their bank account. You can set yourself apart from the competition by using the proceeds of a business loan to afford
salon marketing ideas without taking away cash flow from other parts of the business.
5. Acquire an Established Salon
In the hair salon industry, you don’t necessarily have to start your business from scratch. Many salon owners opt to start their business by purchasing an existing hair salon and building from there. Of course,
purchasing an existing business can be expensive, even if it’s a good deal. Rather than missing out on the opportunity to buy a salon because you don’t have the cash, you can use financing to make your purchase.
How to Research and Apply for Hair Salon Financing
After defining your financing needs, researching and applying for hair salon financing should be simple. For example, if you have the money for a new space but still need salon equipment, it’s clear that you’ll need to research financing to pay for that equipment, such as equipment financing.
Alternatively, if you need funds to pay for a new space, equipment, and stylists, a small business loan may make more sense since the allowed uses of funds are more flexible than they’d be with equipment financing. There are various ways to acquire a business loan, including SBA loans, traditional bank loans, and alternative financing.
Once you have an idea of how much money you’ll need, you should restrict your research to the financing that meets your needs. While the rates for smaller loans may be attractive, those loans aren’t much use if they don’t provide enough money for you to grow your business.
After you’ve identified a potential financing source, make sure to compile all the documents you need to complete the application. Be prepared to ask your lender questions and try to respond quickly to avoid any delays in your application process.
Conclusion: Consider a Salon Loan
The right kind of financing can quickly bring your hair salon business to the next level and beyond. However, as you can see from this post, there’s a lot to consider before making a final decision. Hair salon financing can take many different forms and it’s ultimately up to you, the business owner, to ensure that your financing plan facilitates your business’s growth.
Editor’s Note: This post was updated for accuracy and comprehensiveness in February 2021.