As you might imagine, one of the biggest obstacles to a business expansion is lacking the necessary capital. Starting a new salon costs approximately $62,000, and that’s if you rent your location — building a new site outright is far more expensive. Even if you have saved up enough funds, there’s still the matter of maintaining your existing locations.
Thankfully, there are many capital and financing options available to salon owners:
Personal savings and existing revenue can be an excellent financing source if you’re turning enough of a profit to do so. Even just having a portion of reallocated funding reduces the risk for lenders and investors, making it easier to obtain loans from outside sources.
Traditional loans and credit lines
Most businesses use traditional bank loans for financing, but they are not without risks. Banks tend to have highly-regimented repayment guidelines and significant consequences for missed payments. As an alternative, business credit lines are more flexible and helpful if you need to draw on capital as required instead of obtaining a lump sum.
Small business loans
If your salon falls within the legal definition of a small business, you may be eligible for specialized financing options. In these cases, the Small Business Association will work on your behalf to secure low-interest loans from partner banks.
Borrowing from friends or family
Some beauty salons are family businesses, opening the door to private loans with flexible interest from friends or family. Unfortunately, these options can place immense strain on personal relationships. If you remain professional, follow a written contract, and set clear repayment expectations, it can prove successful.
If you’re willing to negotiate for a portion of your ownership, private equity can be an excellent financing solution. Capital firms are always looking for high-return initiatives, and successful businesses looking to expand can be relatively low-risk to their bottom lines. Alternatively, you might find a solo investor who can partner with you for business shares.
For suggestions on raising capital, check out “Salon Financing: How to Raise Capital for Your Beauty Business.”