beauty salon loans

The Best Beauty Salon Loans for 2021

Opening a standard beauty salon can be expensive. The cost of setting up a salon varies according to the type of beauty business you plan on running and the sort of equipment you will be using. You should also consider factors like the physical location of your business and if you plan on owning or renting a premises.

At A Glance — Are you building or buying a new salon, or do you want to expand an existing salon business? A small business loan can help you start a new beauty salon and invest in the latest equipment. When sourcing the best beauty salon funds, it’s best to go for industry-specific loans, as they will give you lower interest rates and improvement repayment plans.

Introduction

Starting your dream beauty salon isn’t an easy task and you will require funds to make your vision a reality. The amount of capital you will need depends on the anticipated size of your business. This detailed guide discussed the best beauty salon loan option, the features of these loans, and how to apply.    

The 6 Top Beauty Salon Loans - Summarized

This section will discuss the best financing solutions available for beauty business loans.

Financing Need

Best Loan Type

Loan Features

Recommended Option

Supplies & inventory

Business line of credit

  • Amount up to $500,000
  • Up to 24 hours
  • Interest rate between 7% and 25%
  • Loan term between 3 and 18 months

 

Fundbox

Salon equipment

Equipment financing

  • Up to 100% of the equipment value
  • Loan term up to six years
  • Interest rates from 4% to 40%
  • Up to two days

 

SmartBiz

Operating cash

SBA loans

  • Up to $5.5 million
  • Interest rate as low as 6.75%
  • 6 to 25 years repayment term
  • Two weeks to process

 

Kabbage

Equipment lease payment

Business term loans

  • Between $2,500 and $250,000
  • APR is from 14%
  • Repayment term of 3 to 18 months
  • Time to receive the loan: Up to 24 hours

 

Funding Circle

Startup capital

Startup business loans

  • Interest rate between 10% and 28%
  • Up to 24 hours

 

Fundera

Physical location

Commercial real estate loans

  • The loan amount varies depending on the value of the property
  • Time to receive the loan

 

OnDeck

 

Business Loans for Beauty Salons Explained

This section will give a detailed explanation of the loan types featured in the table above, and how each type of loan relates to the beauty industry. We’ll also discuss the features of each loan type and how a certain loan can help your aspiring or existing beauty salon business.

1. Business Line of Credit

When you need funds to cover your monthly bills or employee payroll, a business line of credit is the best option. It allows you to borrow a certain amount whenever you need capital. Fortunately, you don’t need to pay interest until you start using the funds. 

A business line of credit is excellent if you’re looking for working capital for your beauty salon business. You can use a line of credit to purchase salon equipment and more. 

Fundbox is an approved SBA online loan lender. The Fundbox line of credit is calculated in relation to your current beauty salon invoices, turnover, and the risk associated with each invoice. The loan amount that is offered by the Fundbox generally falls between $1000 and $100,000. Fundbox offers short application processes and low minimum credit score requirements.

fundbox

2. Equipment Financing

If you need to purchase equipment, machinery, or technology for your beauty salon business you will likely need an equipment financing loan. With this loan type you’ll receive 100% of the value of the equipment you wish to purchase. The equipment serves as collateral, so you won’t need to worry about your credit score. 

You can use equipment financing to purchase the latest salon equipment to keep your business running. If you can’t get a business line of credit loan consider applying for equipment financing. 

SmartBiz is among the leading lenders for SBA and construction loans, but they also provide equipment financing. We recommend it due to its high approval rate. Additionally, SmartBiz offers a longer repayment plan. 

3. SBA Loan

Small Business Administration is offered to small businesses to help support their new startup. The SBA loan reduces the risk for small business owners, making it easier for them to access fundings. This is possible because the government offers backup, which covers up to 85% of the total loan amount.

SBA loans are outstanding for acquiring the startup capital you need to open your beauty business. Additionally, you can use the money to finance your operating cost.

Kabbage is best for invoice factoring, but it also offers SBA loans. You don’t need to worry if you have a bad credit score when applying for a loan with Kabbage.

4. Business Term Loan

If you need cash to cover daily operation costs or buy equipment, the business term loan might be right for you. With a business term loan you will receive a sum of money, which you will need to pay back within a specified period of time.  

Funding Circle offers the lowest APR rates and few restrictions on loan purposes. Aside from fast approval, Funding Circle provides a dedicated account manager that’ll see you through the loan application process. 

5. Startup Business Loan

Startup business loans provide you with the funds you need to kick-start your business idea and grow your company. Startup business loans can be used for business development, the purchasing of property, marketing, and operating costs.

In some cases, you might need:

  • Collateral
  • A credit score of 600 or more
  • Business needs to be active for 11 months

Fundera is our choice lender for startup loans. If you have a startup beauty salon and have no previous track record or history to support your application, Fundera will work with you to ensure that your beauty salon loan application is successful. 

6. Commercial Real Estate Loan

A commercial real estate loan is the best solution for beauty salon business owners who want to acquire a physical location to run their businesses. The bank gives you a sum of money that you can use to reshape/purchase a commercial property or land. This type of loan also boasts low-interest rates and extended repayment terms. 

OnDeck is one of the best online lenders when it comes to commercial mortgage loans. This lender has lower credit score and lenient borrower requirements. They also offer repayment discounts and flexible payment plans.

What Are Beauty Salons Loans?

Beauty salon loans are loans that specifically help beauty salon entrepreneurs finance their business. This can be a secured or unsecured loan, an SBA loan, a line of credit, or a commercial real estate loan. 

 There are various loans for various business situations and the different stages of business that your salon may currently be in. Certain loans do not need collateral, while others require this. Some loans are granted based on personal credit score, while others are based on your annual revenue. 

What Can You Use A Beauty Salon Loan For? 

You can use beauty salon loans to, for example, buy commercial real estate, buy new equipment, for funding payroll, proving work capital, or to help with various other business-related costs.  

What Is the Minimum Credit Score Needed To Receive a Beauty Salon Loan? 

This will vary from lender to lender. For instance, certain traditional banks need you to have a credit score of over 650. Other alternative funding lenders may have lower score demands, and some may not make their lending decisions according to your credit score. 

Many lenders will take your personal credit score into consideration, unless you have an established Employer Identification Number (EIN) with its own history of credit. Specific lenders will take both your EIN score and personal credit score into consideration. Most of the lenders we covered above will look at your personal credit scores and the revenue of your beauty salon business. 

How Much Does it Cost to Open a Beauty Salon? 

When estimating your startup cost, consider what your one-time costs and recurring and ongoing costs will be. This will help you determine the type of loan your salon business needs. 

One-Time Costs

Some one-time costs you should consider include: 

  • Certification
  • Licenses and permits
  • Salon equipment
  • Physical location
  • Initial inventory
  • Initial supplies
  • Insurance
  • A good website
  • Operating cash

Recurring and Ongoing Costs

Here are some ongoing costs to consider:

  • Insurance
  • Lease or mortgage payments
  • Wages
  • Permits
  • Equipment lease payments
  • Self-employment taxes
  • Utilities
  • Cleaning
  • Marketing
  • Repair and maintenance

What Loans Types Can Beauty Salon Owners Qualify For?

Beauty salon owners can apply for various loan types, in keeping with the legal structure of their business. For instance, being a LLC, or a sole proprietor, or a corporation can influence the type of loans you can apply for. 

There are several loan types for beauty salon businesses, such as long-term loans, short-term loans, SBA loans, commercial real estate loans, secured loans, credit cards, lines of credit, and equipment loans. 

Can I Get a Salon Loan Without Putting Money Down?

Certain types of funding for your salon business, including lines of credit, business credit cards, term loans, and equipment financing don’t need a down-payment. Yet, in certain instances, a blanket lien or personal guarantee could be needed before you can receive funding. Make sure you carefully read the terms of your contract before you sign anything. 

Can A Salon Business Qualify For A Grant?

Yes. There are grants available for beauty salon businesses. Yet, grants are generally highly competitive and come with many requirements.

The Bottom Line

Choosing the best loan option for your beauty salon business can be a daunting task. Besides considering the approval time, loan amount, and interest rates you want, you should also make sure that the loan you select meets all of your business requirements.   

Make sure that you are happy with the repayment terms before choosing a loan provider. This will help you avoid breaching the agreement. A breach of agreement may lead to penalties. 

In this article our experts outlined the top loan options for your beauty salon business. Now all you need to do is choose the best loan for your specific beauty salon needs. Best of luck!