Best Business Loans for Spas

What is a spa business loan?

Spa business loans are any type of financing provided to cover business related expenses. The money must be paid back with interest in most cases. Whether you need to finance inventory or emergency expenses there are a variety of spa business loans to choose from. Keep reading to learn more about spa business loans and how they work.

How do spa business loans work?

In simplest terms, spa business loans will provide you with working capital that you will need to repay. The specifics of how the loan works will vary depending on the type of loan you take out. In most cases, the first step toward securing a spa business loan is to get prequalified. Here are some steps involved with getting a spa business loan that apply to most loans.

Qualifying: The first step of getting a loan is qualifying. Most lenders will want to see a high credit score and reliable credit history, but others will use real estate, equipment, inventory, or invoices as collateral. In some cases, you can get prequalified with no impact on your credit score. Getting prequalified does not mean you are committing to the loan,but rather seeing what the lender can offer. 

Approval: After you are prequalified, the lender may have some contingencies. These can include submitting supporting documentation such as identification, a business license, tax returns,and so forth. If the lender finds any discrepancies they can change the prequalification or revoke it. The approval process can take anywhere from days to weeks to a couple of months. The more documentation the lender asks for, the longer the approval will likely take.

Funding: Once your loan is approved, it’s time to receive the money. In most cases,the lender will specify that the funds must be used for business purposes. Some loans may only be used for specific business purposes such as purchasing inventory or equipment.

Can you get a business loan for a spa?

Yes, you can get a loan for a spa as long as you meet the requirements. Some lenders will want to see a high credit score, good business income, a reliable business history and more. Others are not as picky but loans with fewer requirements often come with higher interest rates.

What can a spa business loan be used for?

Spa business loans can be used for a variety of business-related needs including:

Hiring staff: Payroll can be a business’s biggest expense. Spa business financing can be used to cover hiring and payroll expenses. Businesses often use a line of credit or some other form of financing to improve cash flow as the company grows. 

Operations: Day to day spa operations include everything from the use of products to utilities. You may need financing to cover some of these expenses from time to time. 

Marketing: Every business needs a strong marketing plan. You may require spa business financing to cover marketing materials, marketing software and payroll for a marketing team.

Upgrading equipment and furnishings: Over time, you may find that your spa needs updates to keep up with the competition. Funding may be necessary to cover new equipment and furnishings.

New services: The spa industry is always evolving and it’s important to stay relevant by offering the latest services and technology. You can stay on top of what’s trending by providing cutting edge waxing, eyelash extensions and nail bars.

Types of spa business financing

There are many types of spa business loans available. These include the following:

Traditional business loans: Traditional business loans are typically installment loans or term loans that are funded as a lump sum and repaid in monthly installments. Most lenders offer business loans that do not require collateral. 

Business line of credit: A business line of credit is similar to a credit card but typically with much lower interest rates. Business lines of credit are ideal for businesses that need access to cash on a regular basis.

SBA: The Small Business Administration (SBA) offers loans that are similar to bank loans in terms of the requirements, terms and interest rates. However, the SBA tends to be more forgiving of businesses that default on their loans. The SBA is a government agency designed to help small businesses succeed by providing them with loans.

Merchant Cash Advances: A merchant cash advance is a viable option for businesses that can’t apply for other types of loans. It’s not technically a loan but more like a sum of cash provided in exchange for a percentage of future sales. Payments are deducted from a percentage of your debit and credit card sales. While a merchant cash advance is a good option for businesses that can’t show extensive history and a high credit score, they come with high fees.

Equipment Financing: Equipment financing is another good option for businesses that won’t qualify for other types of loans. It uses equipment as collateral, so credit score and business history are not taken into high regard. However, if you default on your loan, you could lose your equipment.

Invoice Financing: Invoice financing involves having the lender buy your outstanding invoices. They will pay you whatever is owed on the invoices minus a fee. Then they will collect the rest of the money directly from your customers. This type of lending uses invoices as collateral and does not come with extensive requirements.

Alternative Loans: Alternative loans are types of short-term loans that do not require extensive qualifications. Because a lot of documentation is not necessary, the loans can be approved quickly, usually within one to three days. However, they come APR’s that can be well into the double digits.  

Is it hard to get spa business financing?

If you are just starting out, the hard truth is that it may be hard to get spa financing. For very new businesses, business owners may need to start by taking out a personal loan to cover expenses. Once you have some time in business with established sales, you can try applying for a business loan. Some lenders may be more lenient with requirements so shop around before going down the path of alternative options.

What credit score do I need to apply for a spa business loan?

Credit score requirements can vary depending on the lender and the type of loan. Some lenders can share requirements, while others choose to make decisions on a case by case basis. Below, we have organized general recommendations for credit score so you can have an idea of what to expect.

700+: A 700+ credit score combined with a solid sales record should allow business owners to qualify for most types of business loans. A credit score in this category should allow you to access some of the lowest rates available.

640 to 700: If your credit score is between 640 to 700, you may want to consider getting it to the next category before applying. However, with  a credit score in this range and proven sales, you should qualify for most business loans, but they might cost more.

600 to 640: A credit score in this range can make qualifying for a business loan challenging. You may need to secure it with collateral or consider an alternative financing option. 

550 to 600: A score this low may limit you to invoice financing and merchant cash advances.

550 or Below: At this point, your loan options will be seriously limited. A merchant cash advance may be doable, but it will come with high APR’s.

How to get a spa business loan

The first step in getting a spa business loan is to find the lender and loan that’s right for you. This will depend on the type of business you are running, what you can qualify for, how much money you need and what you need the money for. You will want to look for financial institutions and private lenders with good reputations that offer reasonable APRs.

Shopping for loans can be time consuming, but there is a way to simplify the process. The secret to fast and easy business loan shopping is PrimeRates. At PrimeRates you can check offers from trustworthy lenders from the comfort of your home or office or even mobile phone. With just a little bit of information, you can check your rate within minutes. Once you have decided which offer you want to move forward with, you can finish the approval process with the lender. 

Ready, set, relax. . . apply for a spa business loan today!