The beauty industry in the United States currently employs roughly 82,000 people and generates approximately $20 billion in revenue annually. From 2006 to 2015, more than 9,000 SBA 7(a) loans were made to beauty salons across the country, resulting in a consolidationnow.com total loan amount of more than $1 billion and an average loan size of approximately $110,000 per loan.
Various factors influence salon owners’ decision to take out 7(a) loans. These factors include the fact that 7(a) loans can be used for both working capital and equipment purchases and commercial real estate purchases and that they can be more easily obtained than traditional bank loans.
What You Need to Know About SBA 7(a) Loans for Hair Salons
7(a) loans from the Small Business Administration can be utilized to start, purchase, or grow a salon business. The following are examples of typical applications:
- Purchasing new equipment for a beauty salon may be a costly endeavor, especially if you want to invest in high-quality equipment that will meet your customers’ needs.
- Purchasing beauty supplies: SBA 7(a) loans can be used for working capital, which in the case of salons generally means buying supplies such as shampoos, conditioners, and anything else a salon might use regularly. Additionally, SBA 7(a) loans can be used to pay salon employees’ wages and to supplement the salon’s an advertising and marketing budget, among other uses.
- If purchasing an existing salon or even purchasing out a partner in your current salon business, an SBA 7(a) loan may be an excellent option.
- When a borrower is being charged ‘unreasonable terms,’ and the debt is being used to fund acquisitions that might have been financed with a 7(a) loan, SBA 7(a) financing can be used to refinance corporate debt (i.e., no personal expenses allowed.)
Other Types of Small Business Administration Loans for Salons
While the SBA 7(a) loan is a fantastic option for many salon owners, it may not be the most appropriate form of financing for all of those who apply. The SBA Express loan, in particular, may be of interest to salon owners searching for faster SBA financing because it can be issued significantly more quickly and has a maximum loan amount of $350,000.
Others seeking a smaller amount of finance may wish to consider SBA microloans, which have a maximum loan amount of $50,000 and do not often have the stringent credit standards that may prevent borrowers from qualifying for other types of SBA financing.