Disclaimer: Information in the Business Financing Blog is provided for general information only, does not constitute financial advice, and does not necessarily describe Biz2Credit commercial financing products. In fact, information in the Business Financing Blog often covers financial products that Biz2Credit does not currently offer.

If you’ve thought of owning your own beauty salon and spa, you’ll need a few strategies to finance your business. Opening a beauty salon and spa fulfills the dreams of many cosmetologists and beauticians. As with any small business, that dream requires a fair amount of cosmetic business capital to start and maintain your salon’s operations.

Depending on which beauty services you offer, you may need capital for styling stations, salon chairs, tanning beds, hair washing and shampoo stations, hair styling tools, and dryers. You might also need special equipment and inventory for cosmetic and nail services, massage tables, waxing and facial supplies, and more. Or, maybe you want to expand your business and need financing to get you on your way.

Either way, let’s explore some statistics about the beauty salon and spa industry:

• According to Statista, hair care salons in the United States are expected to generate $13.6 billion in 2024.
• Per Trafft, the global beauty salon industry was projected to be worth $215.65 billion in 2022. Moreover, it’s forecast to reach $383.8 billion in 2030.
• Buying an existing salon or spa can cost $50,000 to $300,000, while new salon and spa startup costs range from $120,000 to $600,000.
• Salon Today reports that revenues from spa salons grew to a record $21.3 billion in 2023, an increase of 5.7% from the year before.
• Per MarketUS Media, 55% of spa-goers also want facial treatments, while 70% of spas now offer yoga and related wellness services.
  
  The salon and spa industry is booming! There’s no better time to start your salon business. It’s essential to consider your financing options and choose the best loan to ensure the stability of your business and its long-term success.
  
  Let’s explore some top salon and spa industry funding options and learn their advantages and disadvantages.
  
  Highlights:
• You have several financing options, ranging from traditional to alternative financing for your salon or spa. Each has different underwriting criteria and loan terms. Some are more appropriate for specific stages of your business.
• Financial planning for salons is essential to succeed. It’s also wise to seek the advice of an experienced loan provider to help navigate the complexities associated with funding beauty ventures.

In this article:

• Financing Considerations for Your Beauty Salon and Spa
• Financial Obstacles in the Beauty and Spa Salon Business
• Beauty Salon Loan Options
  • Traditional Loan Options
  • Alternative Financing Strategies
• Revenue-Based Financing
• Leasing and Equipment Financing
• Bootstrapping and Business Credit
• Grants and Competitions
• Conclusion
• FAQ

Beauty Salon and Spa Funding Considerations

First, determine what you need to get your salon off the ground.

• Do you want to lease or own your salon? In other words, do you wish to purchase your building and property?
• If you’re leasing, will the landlord build to suit and customize the space for your specific type of business? Or is that another expense for you to consider?
• What types of services will you offer? Will you focus on one or two, such as hair and nail services, or do you want a more comprehensive beauty salon and spa that offers several services like tanning, massages, facials, or medspa?
• Do you plan to hire staff for your salon?
• Do you want to expand your existing salon business by adding new salon stations, hiring new cosmetologists, offering new services, upgrading the appearance of your salon, replacing old equipment, or opening a second location.

The answers to these questions will help determine a more accurate estimate of how much capital you need.

For example, if you’re a startup, you’ll have initial setup costs for your salon equipment, inventory, and beauty products. Plus, you’ll need to consider good lighting, adequate ventilation, and cleaning and sterilization equipment. Remember recurring operational expenses like lease or business loan payments, utilities, insurance, payroll, and other business expenses.

If you want to increase your profits, new revenue streams for spas include cryotherapy or hyperbaric oxygen therapy. Meanwhile, current trends for salon owners include enhancing the guest experience by adding staff for concierge services or offering a new suite of luxury salon services such as brow shaping and tinting, lash lifts, and waxing services.

Whatever your financing needs are for your salon, it pays off to explore your options and choose the best financing to meet those needs.

Financial Obstacles in the Beauty and Spa Salon Business

Initially, getting regular customers and daily revenues for your salon business could take time. Once you do, the salon business can have a slow season, impacting your ability to pay lease or loan payments, buy new inventory, or pay staff and operational expenses.

When this happens, salon owners must boost their cash flow to stay operational until business picks up.

Equipment can also break or need to be updated. So, planning for replacements or getting a loan for new equipment becomes necessary to continue serving your customers.

Carefully planning to meet these expenses head-on will ensure you always have the resources to meet your customer’s needs and grow your business.

Beauty Salon Loan Options

Funding beauty ventures through beauty salon loans is a given when you own your own beauty salon and spa. As with any small business, you’ll need a startup loan and likely several small loans the longer you’re in business.

Equipment loans, cashflow loans, business lines of credit, and revenue-based financing are common types of beauty salon financing. These can be broken up into two primary types: traditional and alternative loans.

Traditional Financing Options

Bank loans and SBA loans are the two most commonly used sources of financing for beauty salons and spas. These loans are great when you need substantial cash for salon startup costs or an expansion. The caveat is that traditional loans require a solid credit history and collateral, often strict criteria for a new business to meet.

Let’s take a closer look at each.

• Bank Loans: A traditional bank loan is a popular choice when financing a beauty salon and spa startup or want to expand your existing salon. The advantage of a bank loan is it comes with lower interest rates and longer repayment terms when compared to alternative loans. Rates may be fixed or variable, and the loan is typically repaid over a set period. You’ll need good credit, a solid business plan, and financial statements to apply.
• SBA Loans: Another type of traditional loan is a Small Business Administration (SBA) loan. There are two primary types of SBA loans – an SBA 7(a) and 504 loans. They are government-backed loans designed to support small businesses. Both loans are appropriate for beauty salons and spas, providing favorable terms and lower down payments. These loans can be used for various purposes, including purchasing real estate, equipment, or working capital.

Alternative Financing Strategies

Because of the strict underwriting criteria required by traditional loans, salon entrepreneurs often look for alternative ways to fund their beauty salons and spas. These alternative forms of financing include Angel Investors, venture capital, and crowdfunding.
Here’s a closer look at each form of alternative financing.

• Crowdfunding: Kickstarter and Indiegogo are two of the most utilized crowdfunding platforms for a niche service like the salon or spa business. These community-driven platforms allow you to seek funding from many contributors. By creating a compelling pitch and diligently marketing your campaign, you can generate the necessary capital without taking on debt. Plus, crowdfunding can boost brand awareness and customer engagement.
• Angel Investors and Venture Capital: Angel investors invest in startups in exchange for equity, while venture capital firms invest with larger amounts of capital for rapid expansion, expecting high returns. The downside to venture capital is it often requires giving up equity. Both options provide financial support and valuable industry expertise. Finding beauty entrepreneur investors can provide significant funding for your salon or spa, although it’s not an easy feat to accomplish.

Each option suits different growth stages and strategic goals for your beauty salon and spa. It’s also not unusual for beauty entrepreneurs to use a combination of funding options. These options can include any of the preceding, as well as some of the following.

Revenue-Based Financing

Revenue-based financing is perfect for an existing beauty salon or spa business that needs quick access to funding without the added burden of fixed monthly payments. For example, it can provide spa equipment financing, help you manage operational costs, cover the purchase of inventory, or assist in growing your business.

With revenue-based financing, repayment is based on your salon sales. In other words, you receive capital in exchange for a percentage of your revenue. This type of financing is suitable for businesses with fluctuating incomes.

Revenue-based financing is excellent if your beauty salon and spa have consistent cash flow and growth potential.

Leasing and Equipment Financing

Lease and equipment financing can help preserve your business’s cash flow. Leasing salon and spa equipment can be more cost-effective than purchasing, especially for high-cost items like salon chairs, spa and tanning beds, and specialized machinery. With leasing, you can offer your clients the best quality equipment without purchasing it, which requires more up-front capital. What’s more, leasing typically includes maintenance of the equipment, relieving you of the burden of maintenance costs.

Equipment financing is available through banks or alternative lenders. You’ll need a sound business plan and financial statements. Some loan providers will also require collateral.

Bootstrapping and Business Credit

Bootstrapping means funding your business using personal savings or revenue from your beauty salon or spa. While this approach lets you retain complete control, it demands careful financial planning for salons to prevent cash flow problems.

Building a solid business credit profile can unlock additional financing options, such as lines of credit and invoice financing. These options offer flexible funding solutions to handle short-term expenses and manage cash flow more efficiently.

Grants and Competitions

You can also research to find funding opportunities for your beauty salon and spa through a grant or a competition, especially if you’re a woman or a minority. Government programs, private organizations, and industry associations offer the grants. Grant money can be used for startup expenses, operating expenses, or expansions. Note the application process can be time-consuming, and you’ll need to meet specific criteria for eligibility. But if you successfully secure a grant, it’ll be worth it because you’ll have the capital to fund your beauty business venture.

A business competition is another route to securing funding. It can also help increase your brand visibility. Many of these contests offer valuable networking opportunities and mentorship in addition to cash prizes.

Conclusion

Explore the different types of financing available for your beauty salon and spa. Then, you can make the best decision for you. Partnering with a financial provider who understands your industry’s unique needs is also beneficial. Proactively planning your finances will ensure your salon’s growth and long-term success.

Learn how Biz2Credit helped Gulum Mustafa and Jyoti Sharma fulfill their spa and salon dreams and grow their businesses.

FAQ

What are some popular financing options for a new beauty salon and spa?

Many beauty salon owners initially apply for SBA or bank loans or seek crowdfunding or angel investors. But, revenue-based financing has become a more popular option due to the ease of qualifying for the loan and the difficulty in obtaining other forms of funding. Revenue-based financing provides more flexible payment terms and an easier loan underwriting process, often approving applicants with credit scores as little as 575.

Is there a way of improving my chances of getting beauty salon loans?

Absolutely! First, focus on improving your credit score. Lenders judge how well you handle finances by examining your credit history. Next, prepare a solid business plan that outlines a clear strategy for your salon business. Explain what you plan to offer in your salon, how you plan to bring revenue in for your business, who you anticipate your customers will be, and how much you feel you can bring in. Also, identify what you’ll offer your customers that your competitors won’t.

Are there any grants available for women-owned beauty salons?

Yes, many grants are offered specifically for female beauty business owners. These grants don’t require repayment. Researching and applying for grants can be a lot of work, but if you’re successful, you’ll get beauty business financing to grow your business.

Is it better to lease or buy my spa and salon equipment?

It depends. Buying incurs substantial upfront costs and ongoing maintenance. But you’ll own the equipment, and should you decide to sell your salon business later on, you may get a better price with more assets. Leasing has lower upfront costs, plus you can upgrade your equipment when newer, trendy versions come out. Consider these factors and which most align with your business goals before deciding whether to buy or lease your salon equipment.

Is revenue-based financing a good idea for my spa or beauty business?

It often is! Revenue-based financing will give you the capital you need for a portion of future revenues. It’s perfect for businesses with stable cash flow and significant growth potential. Revenue-based financing has flexible repayment terms based on your monthly receipts. It also offers an advantage over traditional loans when your income fluctuates.

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