Hair salons in the U.S. account for $47 billion in revenue, according to research company IBISWorld. Your beauty salon or barber shop contributes to that market share.
But there can come a time when you need a bit of a financial lift to grow your business or get through slow months. That’s when beauty salon financing or a barber shop loan can provide you with crucial capital.
Financing Your Beauty Salon or Barber Shop for Success
According to salon software provider Phorest, nearly 32% of hair and beauty salon owners and barbers indicated that getting new clients is the greatest challenge they face, with 20% saying the same of retaining existing clients.
Lack of clients means lack of revenue, and when that happens, cash-flow shortages can make it difficult to operate the way you’d like. Here are a few reasons you might turn to a business loan for your beauty salon or barber shop.
If your hair salon or barber shop is in need of new equipment, financing can help you obtain any of the following and more:
- Styling chairs
- Stylist trolleys
- Color processors
- Hair dryers
- Shampoo stations
- Dryer chairs
- Point-of-sale system
- Televisions or audio equipment
Do you need to restock hair dyes, shampoos, conditioners, brushes or other salon products? Whether for your stylists’ needs or for your sales inventory, a small business loan can provide you with capital so you can make bulk purchases.
Cover Rent and Utilities
Let’s say your salon is the size of a modest house. If your rent ranges from $1-$2.5 per square foot, the average rent range for salons, according to TheSalonBusiness.com, that’s a pretty penny. On the low end, a 1,500 square-foot space could cost $1,500 a month and on the high end, $3,750.
According to TheThrivingStylist.com, in 2020, commission-based salons spend 40% of their budget paying stylists and an additional 5% paying support staff. What’s more, the U.S. Bureau of Labor Statistics noted that the median hourly wage for barbers was $14.50 in May 2019, while hairdressers and stylists earned $12.54. That can add up when months are slow and you have other bills to pay.
Best Beauty Salon Financing and Barber Shop Loans
Here are a few funding options for your beauty business or barber shop.
Beauty salon or barber shop equipment financing can provide you with a one-time infusion of capital to cover your equipment purchase. In some cases, you could be able to finance 100% of the equipment cost.
Business Term Loan
Another option for a one-time infusion of capital is a business term loan. Funds can be used for nearly any business need, and repayment terms can extend several years. Depending on the terms of your beauty or barber shop loan, your installment payments could be daily, weekly or monthly.
Small Business Administration (SBA) loans are an alternative to conventional business term loans when you need funding for your beauty business. That’s especially true for borrowers who’ve had their loan request denied by banks and are still in search of competitive terms.
Lenders who partner with the government agency are at less risk should a borrower default on a loan they’ve funded. That’s because the SBA guarantees a portion of each loan from a partner lender.
Business Line of Credit
An alternative to a salon or barber shop loan, a business line of credit is a great option if you’re looking for flexible funding you can access continually as needed. Think of occasional bulk supply purchases or emergency expenses.
It works similarly to a credit card: You’re approved for a certain limit and you can tap into it when needed (or not at all). As you repay borrowed funds, your credit is restored proportionate with your repayment, up to your original limit.
Working Capital Loan
If you need a bridge of capital to get you from one month to the next, a working capital loan could be the answer. This type of beauty salon financing is typically meant for short-term expenses, such as one-off rent, payroll or debt payments. As such, they often have quick repayment schedules.
Merchant Cash Advance
A merchant cash advance is an alternative funding solution that can be useful if you need to finance a short-term expense and you need money fast. Funds are advanced based on your beauty or barber shop’s projected revenue. This type of financing is accessible for many business owners, including those with what some lenders might consider “poor credit.”