Actionable Steps on How to Get a Business Loan for a Salon
27 Jun, 2016 / Comments: Comments Off on Actionable Steps on How to Get a Business Loan for a Salon / By William Mahnic
There are more than 1 million salons throughout the country, showcasing the profitability of this business model for those interested in the industry. If you are among the talented that can deliver high-quality haircuts and styles, nail art, or relaxing spa therapies, opening your own salon can be a great way to reach the level of success you desire. Before you start, though, there are certain steps you should take to ensure that you get the business loan you need to open a salon as obtaining the funding is the first step towards your desired success.
Do Your Homework
No business can succeed without plenty of research. Start early – even before you decide you want to be a business owner. Research your various options including purchasing a franchise salon and using their business model; purchase an existing salon that simply wants to change owners; or start your own salon from the ground up. Obviously, starting from the ground up takes the most work and possibly funding, so it is important to make sure that you have plenty of research to back you up and to help you create the perfect plan.
Create a Business Plan
Your business plan is the best way to pave the way to lucrative financing. Lenders need to see that you understand the industry, have a plan to make a profit, created a cash flow projection, and have a plan for the future. It is not enough to create a business plan that only plans for the big opening and then falls flat after that. It should detail your plans well into the future and be amendable should you want to expand or change your focus if things do not go as planned. The lender is interested not only in how you will do today, but how you will do five and ten years down the road, so you need to show planning for at least that long.
Check Out Your Credit Score
Your credit score is the driving factor for your loan approval. If you have never owned a business, you will not yet have a business credit score, which means your personal credit score is up to bat. Clean it up as best you can in the year preceding application for the business loan. Take care of collections, judgments, and excessive outstanding credit. The ideal situation is to have only 30 percent of your available credit outstanding so that you show financial responsibility rather than a pattern of rash spending.
Create a Niche
Opening a salon can mean that you cater to anyone, but if you really want to be successful and want lenders to look at you as a profitable opportunity, you need a niche. Think of the services you will offer and who will benefit from them the most. Show that your plan and advertising will be geared towards this audience for maximum success. This is where your market research comes into play – show the lender that you truly understand what your audience needs and how they will respond to the services you have to offer based on your research.
There are many different salon opportunities out there for you, but the first step is getting that business loan in order to make your dreams a reality. Before you ever fill out an application or talk to a lender, get your ducks in a row. Make sure that you can show that you are the expert in the industry based on your research and the time you put into coming up with the perfect plan. This is not to say that the lender will hold you to this plan should you need to change things up if they do not go as planned, but being prepared as possible will help you pave the way to successful financing for your salon dreams.