Read about the best small business loans for your beauty salon; a line of credit, financing for owners with bad credit who want to start up a new hair salon or need working capital and equipment purchase funds.
Here’s the how and why that Kabbage business loans are best for your beauty salons, either for equipment expansion or short-term working capital lines of credit, because access to business financing is a key part of your salon’s success, growth, and profitability.
Read answers to your questions in plain English without a lot of that confusing banker jargon.
>> RELATED: Read my Kabbage Loan Reviews – Right for your Business?
What are the Different Types of Loans for Beauty Salons?
Are you unsure of what the different types of loans are such as secured, an unsecured, asset-backed, line of credits or equipment purchase and lease?
Kabbage loans offer both types of these loans for professional beauty salons and spas:
Working Capital – Sometimes referred to as a business line of credit, this is a source of funds to use as you choose to run your business on a daily basis.
You can use the loan proceeds for rent, payroll, supplies, marketing, advertising or any other business-related expense. As you use (draw) the funds, you pay back a portion of that amount on a monthly basis.
Once you pay back the funds you can reuse the money at a later date for more business building purposes.
Equipment ( Purchase or Lease) – These loans, dependent upon the total amount and intended purchases, can be secured or unsecured. Secured loans are “secured” or backed by the asset of the loan proceeds purchase – in this case, our salon equipment.
However, these loans are very specific about which type of equipment and the dollar value. Generally, they are designed for industrial machine purchases that have a long usage life and are easily resold. You see the lender is holding the asset as collateral in case you do not repay the loan.
Which is Best Business Loan for My Beauty Salon?
Luckily, in the case of Kabbage loans, you don’t need to know because the answer to this question will be answered by their loan professionals. Once you apply (which is super easy 🙂 they will carefully review your current situation and recommend the best type of loan at the lowest rate you qualify for – working capital or equipment loan.
These loans are designed for the way your salon actually operates.
When you expand your spa you don’t usually buy one large piece of equipment, like a manufacturer buys a bottling machine, instead you need to purchase many smaller items from different suppliers such as salon quality products from your beauty distributor, tools from specialty suppliers (manicure, facial, massage) and smaller equipment such as manicure stations, massage tables, yoga mats, etc.
Positives of Kabbage Loans for Beauty Salons – Why they Matter
- Super Easy to Apply – Thankfully gone are the days of stacks of paperwork and forms to fill out. Now Kabbage uses the power of computers and your business data to review the financial health of your company and approve your loan.
The application process is fully online, where you “connect” your online accounts, both credit card payment processors (such as Paypal, Amazon, Stripe, etc), bank accounts and accounting software (Intuit Quickbooks, Xero, Sage, and others). Then Kabbage assesses your business performance and sometimes in minutes, up to 48 hours, will notify you of the line of credit approval. The streamlined process is assisted by operators at the toll-free number 888-986-8263.
Because applying is so simple and quick you are more likely to get it done, whereas I remember having a large loan file sitting on my desk for months incomplete because it was such a hassle to complete that I procrastinated. Thus I never got that line of credit and my business suffered.
- Faster and Easier to Get Approved for Lower Credit Scores – Compared to traditional bank loans Kabbage lines of credit are much easier to get approved, even with low or poor credit scores. In fact, Kabbage got started specifically to lend money to growing small businesses that were denied access to bank loans. This means that you can get the money you need to keep your business going through seasonal sales shifts or to expand into different product offerings and markets to build a bigger business annually.
Instead of focusing solely on your credit score, which could be poor or none, they review your whole business and its recent performance (in the business accounts you connect such as your business checking account and Quickbooks) to determine a more accurate and favorable, for you, a picture of your company’s creditworthiness. Kabbage believes it is unfair that banks don’t look at the big picture of your business and turn you down for small business loans. Financial indicators such as sales revenue totals, consistency of sales, cash flow and your personal credit score all add up to your approval status.No longer do you have to wait and worry for weeks if your loan will be approved, and put your business plans on hold or cancel them outright because you will know right away if your Kabbage loan is approved. You can go forth to reach your business goals.
- Get Money Fast – Once your hair salon or spa is approved for a Kabbage loan the money can be available in as soon a few hours in your Paypal account, or a few days into your business checking account. This allows you to pay salaries to retain top talent in your salon, make bill payments on time to avoid late fees and move forward with your exciting business plans.
- Renewable Source of Business Financing – Unlike standard installment business loans, which were paid in full with monthly payments, once you repay your Kabbage loan you can reuse the funds for new business initiatives continually.
Think of it as a second form of bank account, with money at the ready to meet business cash emergencies, unexpected events and to capture sales opportunities as they arise. Having this source of business financing is a smart way to ensure your company against getting caught short on cash and staying in business long term.
Negatives about Kabbage Beauty Spa Loans – How to Deal with Them
- Higher Loan Fees – Because lending to your business, with no collateral for security and low credit scores, is riskier your fees will be higher than bank rates.
HOWEVER, since you will not be able to get approved for a bank loan it is not correct to try and compare rates. Because while your local bank advertises low-interest rates they won’t give you a loan so what does the low rate matter! Think of it this way, a low APR (average percentage rate of interest) business loan that you don’t get does not pay for anything! Get it – 100% of nothing is nothing! Compare that to a higher interest rate of a loan that you DO get approved for. Now you can expand your business and create greater sales and profit – that is 100% of something which makes money for your business. Right!
Right Way to Evaluate Short Term Business Loans: ROI – Return on Investment.
This is a financial calculation that focuses on the “value” of the loan money to your business and your ability to make money with the loan money.
In fact, Kabbage provides an ROI loan calculator which you can use to determine exactly how much “value” and return you will get on your loan.
Here’s an example:
- Cost of Equipment – Five (5) Hair styling stations @$3,000 per = $15,000
- Estimated monthly revenue from new equipment = $ 5,000
- Estimated years in service = 5 years
- Loan Term = 12 months
- Fee Rate = 4.0%
- Total Investment = $19,500
TOTAL REVENUE = $300,000 (Number of units X sale price per unit = Revenue)
- INVESTMENT – $19,500
ROI – Return on Investment = $280,500 – 1438%
Doesn’t that make more sense – seeing how the money from your Kabbage loan will build your business instead of just comparing numbers of loans (most which you will be denied)
Screenshot of ROI Loan Calculator
Variable Loan Repayment Amounts
Because your Kabbage loan is not a fixed amount, with the same fixed monthly payments your loan repayment amount will be different each month. Thus you cannot allocate the exact same amount for your loan repayments and could find it difficult to balance your business budget.
Your monthly billing cycle repayment will be an equal portion of your loan principal plus a monthly fee, only when you have an outstanding loan balance. But because you may not use your total line of credit this amount will change.
I recommend that you use one or more of these options that Kabbage to be aware of the amount and due date. This way you can make your payment on time, in the correct amount, avoiding late payment fees and risk to our line of credit closure. Managing your loan repayments is important to retaining, and increasing your access to future credit for business cash shortfalls and expansion funds.
Kabbage Mobile App – Available on iTunes app store and Google Play
Autopay of Loan Repayment
Make your business owners accounting easier with Kabbage autopay which will withdraw you loan repayment from your primary bank account monthly. I like the ease and convenience of this service – one less thing to remember and do!