Find out all about the different beauty salon loan options that can be used to meet the needs of your business.
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A beauty salon loan can cover a wide range of expenses related to running a salon business. These include:
Having a well-stocked inventory is crucial keeping operations running smoothly, and a loan can come in handy to ensure that you’ll have the supplies you need during moments where you’re facing a cash crunch.
It can also be used to help you capitalise on the latest beauty trends, such as the growing popularity of natural, organic brands or stock up on product lines that are currently in demand.
An equipment loan or equipment leasing can help provide the infusion of funds needed to purchase additional equipment, or replace existing ones to ensure that your services and treatments are in line with emerging beauty trends.
Overcome seasonal fluctuations
Seasonality can impact your business in both positive and negative ways. In identifying these patterns beforehand, you’ll be in a better position to plan out strategies that’ll enable you to smoothly navigate through the peaks and troughs throughout the year. Taking out a loan can help your business tide over the slower times, or to cover the costs of hosting events and offering specials during the festive, prom or wedding seasons.
Manage workforce expenses
When you’re starting out, it’s likely that you’ll be the only staff handling all aspects of your venture. But as your business grows over time, you may need to bring on additional employees to cope with the growth of your business.
Beyond payroll expenses, you’ll also need to look into investing in the training and development of your staff, so that your offerings will stand out in the competitive salon and spa sector. At hair salon PREP Luxe, founder Jacqueline Chang makes continual learning a priority. She states: “To stay ahead of the competition, our stylists are always well versed with the latest global hair trends, and even in adapting hair trends off the fashion runways into PREP Luxe.”
Fund marketing activities
Implementing a combination of online and offline marketing initiatives is key for getting the word out about your venture. Common strategies utilised by beauty salon businesses include setting up loyalty programs, implementing referral programs, conducting in-store or pop-up events, striking up partnerships with influencers, leveraging user-generated content and investing in content marketing and social media campaigns.
Invest in digitisation
Managing appointment cancellations, missed bookings and staff rostering are issues that service businesses deal with on a day-to-day basis - but investing in the right digital tools can help business owners handle these tasks more efficiently. These include POS and scheduling platforms (Square, MindBody), beauty booking platforms (Vanitee) and salon management solutions (Vaniday).
And in the age of rapid technological developments, it pays to keep ahead of the ever-changing needs of your consumers - whether that’s tapping on digital platforms to better communicate and engage with customers, or adopting cashless payment services. Mr Gavin Teo, managing director of beauty salon chain Avone Beauty Secrets advises: “It's about the convenience and if we don't adapt, we will be left behind.“
Unlike secured loans, which require a borrower to pledge assets as collateral, unsecured loans don’t require collateral, and are approved based on factors like your ability to repay and business credit score.
Hairstyling chairs, manicure tables, spa jets - the costs of obtaining equipment to keep your outfit updated and operating smoothly can quickly add up to a sizable sum.
Here’s where equipment leasing comes in. Simply put, it’s a long-term rental agreement; you don’t make an outright purchase nor own the equipment. Monthly payments are made to your lender, typically over a multiple-year period.
At the end of the lease, you’ll have the option of returning the equipment or purchasing it at a fair market value. This makes an equipment lease a better option (relative to an equipment loan) if you’re looking to upgrade your equipment when the lease ends.
Merchant cash advance
A merchant cash advance (MCA) is based on your credit card transactions. Through a provider, you’ll obtain an advance payment, which will be repaid with a percentage of your daily or weekly credit card sales. MCAs offer flexibility and versatility, as you’ll make smaller repayments during lull periods (rather than paying off a fixed sum regularly), and may use the funding for a variety of short term business needs.
Line of credit
Think of a line of credit as a business credit card rather than as a loan - you’ll borrow a pre-approved amount, and can draw from this sum repeatedly. Interest is charged only on funds that are drawn, and the amount that you repay is again available to be drawn.
A line of credit can be used to fund a wide-ranging array of needs - from covering gaps in cash flow, to paying off inventory costs, payroll and large-scale purchases. The flexibility that it offers makes this form of financing a great option for beauty salon owners, due to the variability of the business.
Seeking out a loan to meet your business needs? Here are a few tips to set you up for success:
Map out a business plan
Newer businesses - particularly those that have been in operation for less than a year - often find it a challenge to obtain loans, as lenders are less willing to fund a young venture without a proven track record of profitability.
Detailing your financial projections, such as your sales forecast, cash flow, income and more will enable your lender to have an idea of where you’ll be at in six months or a year down the road. It’s also helpful to define qualitative objectives in your business plan. Examples of key questions you’ll need to consider include: How will my offerings stand out in the particular market that I’m targeting? How quickly will my venture grow?
Demonstrate your ability to maintain revenue growth
Beauty businesses are considered a high-risk venture as the income generated is typically inconsistent, and retaining customers over the long run is one of the greatest challenges that business owners face. To better your chances at getting your loan approved, you’ll need to demonstrate that you’re able to draw in a steady flow of repeat customers and maintain a consistent revenue stream.
A good time to make your loan application will be after you’ve attained three to six months of steady growth in your revenue, as potential lenders will see this as a clear indicator that your business is headed in the right direction.
Show that you’re ahead of the competition
With home-based ventures, independent salons and established salon chains operating in the beauty industry, you’ll be up against stiff competition.
As such, it’s important that you demonstrate your ability to compete against more established beauty salons and develop a loyal customer base. For example, if nail spa treatments are your main offering, you’ll need to show that you’re able to keep ahead of, and stand out against competitors that are offering nail services at a lower price.
Traditional banks and lenders often consider beauty businesses to be a high-risk venture, due the income volatility and high level of competition within the industry.
These lenders generally require extensive documentation, and have lengthy onboarding periods and stringent assessment processes in place - factors that make it even more challenging for beauty salon owners to obtain financing.
With online lending platforms like Aspire, loan application processes are convenient, streamlined and speedy - submitting an application takes a matter of minutes, and you’ll be notified of your loan approval status in just 24 hours.