The salon and spa industry have grown tremendously these past couple of years, thanks to the increased interest in beauty, relaxation and personal care. The reason for growth can be attributed to the fact that the industry appeals to customers in every economic bracket, thus there’s never a shortage for clients. With economic census reports forecasting even a brighter future for this industry, there is never a better time to open a salon or spa than now. Today, most Canadians refer to Smarter Loans as a primary resource of locating a business loan company in Canada.
If you’re considering opening a salon or spa, you must take into account everything needed to run the business, from getting the right equipment, to stocking hair and beauty products, to marketing your business and obtaining insurance policies, etc. Luckily, there are many options available to finance your business. From traditional financial institutions to non-traditional lenders, you are guaranteed to find business loans for salons and spas.
The best way to figure out which type of loan suits your business model is to be conversant with the different types of business financing available. The following are the most popular business loans for salons and spas:
- Unsecured Business Line of Credit
Salons and spas don’t usually have the initial collateral required to back a business loan. Therefore, arranging for an unsecured line of credit is something that most people consider. The unsecured credit is usually structured around the business’ needs, its cash flow history, as well as its financial health and that of its owner(s). In most cases, this option has tough financial requirements as lenders assume 100 percent of the risk in the initial investment.
- SBA Loans
This financing option is the most popular alternative to traditional business loans for salons and spas. Small Business Administration (SBA) 7(a) and 504 loan programs are the most preferred. To obtain an this type of financing, you must meet SBA eligibility requirements and adhere to the SBA standard operating procedures for loan underwriting.
- Traditional Loans
These types of loans are offered by financial institutions such as banks and credit unions. They usually offer lower pricing and flexible terms for salons and spas. Conventional business loans are not usually guaranteed by a 3rd party, so the lending institution normally assumes the full risk of the business loan. As a result, the credit standards on these types of loans are usually higher compared to other financing options.
- Merchant Cash Advance
Small business loans in Canada can take on many forms. One of them is a Merchant Cash Advance. This type of loan is usually offered based on the amount of sales a salon or spa has made over a certain duration of time. To qualify for this type of financing, you must have a physical business and an established record of credit card sales. Merchant cash advances can be arranged quickly as they are generally considered as short-term funding. However, they have higher pricing as well as higher interest rates compared to other salon and spa industry loans.
Whatever type of business loan for salon and spa you choose, lenders will require a your detailed financial history. Most lenders will provide you with a list of supporting documents they require in order to consider your loan application.