Finding the best equipment financing option for your salon, spa, or barber shop can be a chore. So, we’ve put together a guide to make the process a little easier. Once you figure out how to pay for the tools you need, opening a salon becomes a much more attainable (and more enjoyable) goal. 

Salon Equipment Financing for 2020

Buying the right equipment to run a successful salon or spa isn’t cheap. Because of the expense, you may worry that qualifying for a large business loan will be difficult. Yet often, the very salon equipment you need may serve as collateral for your loan. As a result, finding affordable financing could be easier than you think. 

5 Options for Salon Equipment Financing

Whether you need hair dryers, pedicure spas, or the perfect salon furniture, the right equipment loan can help. Compare the following business financing and leasing options to see if one might be a good fit for your salon. 

BlueVine

BlueVine was founded in 2013. The lender offers several business funding options, including term loans which might be a good choice for equipment financing. 

Rates: Starting at 4.8%

Requirements: 

• 600 minimum FICO Score
• 6 months or more in business
• At least $10,000 in monthly revenue

Loan Amounts: Up to $250,000

Repayment Terms: 6 – 12 months

Pros:

• You may qualify even with fair personal credit (but not at the lowest rates)
• Fast funding in as little as a few hours after approval
• Prequalify with a soft credit inquiry that won’t hurt your credit score

Cons: 

• Loans aren’t available for start ups
• Low maximum loan amount compared with other funding options
• Repayment terms are short with weekly payments automatically deducted from your business bank account

SBA Loan by SmartBiz

Small Business Administration loans — specifically SBA 7(a) and 504 loans — represent one of the most affordable ways for businesses to finance equipment. Yet qualifying for an SBA loan can be a time-consuming and challenging process. SmartBiz offers a faster online application process that could potentially help your company secure an SBA loan and get funded in less than a month. 

Rates: 6.25% – 8.50%

Requirements: 

• At least 2 years in business (with 2 years of tax returns filed)
• Minimum FICO SBSS Score of 140 required for SBA loans
• Must be a qualifying small business that isn’t deemed ineligible

Loan Amounts: $30,000 to $5 million

Repayment Terms: 10 – 25 years

Pros: 

• Competitive interest rates 
• Lengthy repayment term options
• High loan amounts available
• Shorter application and funding period compared with traditional SBA loans

Cons: 

• Personal guarantee required from owners
• Demanding qualification requirements
• The funding speed on SBA loans can be slower than many other financing options

TimePayment

TimePayment is an equipment leasing company that has been in business for over 30 years. 

Cost: .0219-.0626 factor rate (based on your credit and the length of lease) 

Requirements: 

• 550 FICO Score

Lease Amounts: $500 to $100,000

Lease Terms: 12 – 60 months 

Pros: 

• Transactions of $10,000 or less may be approved in seconds
• Fixed, monthly payments
• Potentially qualify with bad credit (though your cost will likely be higher)

Cons: 

• Can be expensive compared with other borrowing options
• Security deposit may be required

Kapitus

Founded in 2006, Kapitus offers several business financing options, including equipment financing. You can borrow between $10,000 to $500,000 for your business, if you qualify. 

Rates: 7.00% – 30%

Requirements: 

• 600 minimum FICO Score (675 for loans of $150,000 and up)
• 2 years or more in business (for loans over $150,000)
• No bankruptcy filings for at least three years

Loan Amounts: $10,000 to $5,000,000

Repayment Terms: 2 – 7 years

Pros:

• You may qualify with a fair credit score (but expect a higher rate)
• Start ups may qualify with a FICO Score of 600 or higher (up to $45,000 in funding)
• Little to no downpayment required

Cons: 

• You might be asked to make weekly or bi-weekly payments 
• Lender charges an origination fee between 3.5% to 5%

LendSpark

LendSpark is a licensed direct lender that specializes in alternative business financing, including equipment loans. Funding for small to midsize businesses is available to companies located in all 50 states. 

Rates: 5% – 35% APR

Requirements: 

• At least 2 years in business
• Personal and business credit considered (minimum credit score not disclosed)

Loan Amounts: Up to $2 million

Repayment Terms: 3 months – 5 years

Pros: 

• Fast loan approval, potentially the same business day
• Equipment loan and lease options available

Cons: 

• Funding may be slow compared with other lenders
• Doesn’t disclose minimum credit or revenue requirements online

How to Qualify for Salon Equipment Financing

Each lender sets its own qualification criteria when it comes to salon equipment financing or any other type of business funding. Yet all lenders are concerned with two very important details — risk and profit. 

Lenders are more likely to approve your application if they’re comfortable with the risk of doing business with you. Less risk means you’re more likely to pay a loan back as promised. Less risk generally equals more profit for the lender. 

To assess your risk, a lender may consider the following factors when you apply for financing. 

• Your personal and business credit score
• Your personal and business credit report
• The age of your business
• Your annual revenue
• Existing debts and UCC filings in your company’s name

If you want to improve your equipment loan approval odds, these tips may help. 

• Have an active business entity filing with your secretary of state. 
• Make sure you have all necessary business licenses for your industry. 
• All owners should be prepared to provide personal guarantees. 
• Aim for a minimum personal credit score of 600 or higher. 
• Your personal credit reports should be free of bankruptcies (in the last seven years). 
• You and your business should have no outstanding tax liens. 

Can You Qualify for Salon Equipment Financing with Bad Credit?

Bad credit can be an obstacle when you apply for financing — equipment loans or otherwise. With equipment loans, however, you have a factor that works in your favor. The equipment you want to purchase can serve as collateral for the loan, which helps reduce the lender’s risk. Lower risk for the lender can make it easier to qualify for this type of financing. 

If you do qualify to finance salon equipment with bad credit, count on there being a trade off. The interest rates on bad credit loans are generally much higher compared with the rates you can secure with good credit. You may also face higher fees and shorter repayment terms.   

Here are some lenders that might consider approving your funding application if you have credit challenges. 

• OnDeck
• BlueVine
• Credibly
• Kiva
• Fundbox

You might even find salon equipment financing with no credit check required at all. If you do, proceed with caution. No-credit-check financing can be expensive, often to the extreme. 

How Many Years Can You Finance Salon Equipment? 

The length of your repayment terms can vary widely for salon equipment. Depending on the lender, you may find equipment financing options that need to be repaid in a few months. Other loans may stretch out as long as decades. 

Repayment terms are based on a number of factors. First, a lender will assess your risk by examining your credit profile, time in business, annual revenue, current debts, and more. The amount you want to borrow also plays a role. Finally, the lender’s own risk tolerance comes into play — placing a cap on the maximum time (months or years) it’s willing to stretch out repayment. 

Should You Buy or Lease Salon Equipment? 

When you want to finance the purchase of equipment for beauty salons and spas, you have two primary options — buy or lease. Either option may help you stock your location with the tools it needs. But it’s wise to compare the pros and cons of renting versus buying salon equipment before you start filling out financing applications. 

Pros of Buying Salon Equipment

• The equipment itself may serve as collateral, and you may not need to pledge additional assets to secure funding. 
• Your loan may help you build better business credit (if the account reports to a commercial credit bureau and you always pay on time or early). 
• You may be able to take advantage of special equipment owner tax benefits, like the Section 179 deduction. 

Cons of Buying Salon Equipment

• You may need upfront funds (aka a downpayment) to qualify for some types of equipment financing. 
• With low credit scores, you could have trouble finding affordable financing. 
• If the equipment becomes outdated sooner than anticipated, you might have trouble upgrading due to your remaining loan balance. 

Pros of Renting Salon Equipment

• If your equipment breaks, your lease may cover maintenance and repair costs. 
• Your monthly payment may be lower when you lease salon equipment compared with taking out a loan to purchase it outright. 
• You may be able to take advantage of Section 179 tax deductions, even if you’re only leasing salon equipment. 

Cons of Renting Salon Equipment

• Someone else owns your equipment. 
• You can’t take depreciation deductions on your taxes when you rent salon equipment.
• An equipment lease may come with prepayment penalties. 

*Note: For all tax-related matters you should talk to a tax professional for advice about your specific situation. 

Alternative Financing Options for Salon Equipment

Has your business been denied for traditional bank loans? Do you believe you’re unlikely to qualify for equipment financing based on strict lender requirements? There are other types of financing you can consider. 

Business Line of Credit

A business line of credit can provide your company with a flexible way to borrow over and over again. Similar to a business credit card, a line of credit lets you access funds up to a preset credit limit. As you pay back the money you borrow (or a portion of those funds), you can then reuse the credit line up to its limit. 

You can use business lines of credit for a variety of purposes. Whether your business needs to buy equipment or access extra cash for overhead costs, a line of credit might be helpful. Generally, you will need good credit scores to qualify for this type of financing. 

Merchant Cash Advance

A merchant cash advance allows businesses to secure funding based on future credit card sales. If you qualify, the MCA provider will generally take an agreed-upon percentage of your credit card sales every day until you repay your full advance. 

Funding is typically fast with MCAs and the application process can be less involved than you face with traditional loans. MCA providers are often willing to work with business owners who have low credit scores as well.

You can use a MCA to pay for hair salon equipment purchases. But, if you do, you should expect the cost of this short-term financing to be expensive. The APR on a merchant cash advance could climb as high as 200% or more.  

Short-term financing options such as cash flow loans and invoice financing feature similar pros and cons for small business owners. 

Business Credit Cards

You probably don’t think of pulling out a business credit card to pay for equipment financing. And, in many cases, using a credit card to finance your company’s large equipment purchases isn’t wise. (Interest rates on credit cards tend to be much higher than loans, after all.) Yet there are some exceptions. 

You might consider using a business credit card to pay for large purchases, like equipment, in the following situations. 

• You only need short-term financing because you’re confident you can repay the money you borrow quickly. 
• You want to take advantage of a low-interest introductory offer from a credit card provider, and you have a plan to pay off the balance before the low rate expires. 
• You’ll have the funds to pay for your equipment purchase by the statement due date, and you want to earn extra rewards with your credit card. 

Nav’s Final Word: Salon Equipment Financing

The right equipment financing and leasing options can help you grow your business. But it takes some research to find the best deal available for your salon or spa. 

Like any small business owner, you’re probably excited to prepare your location and open the doors to new customers. But don’t be tempted to rush the financing process. Taking the time to compare options and rates can save you a ton of money in the long run. 

Also, don’t underestimate the importance of establishing good business credit. Even if you can’t qualify for the best deal today based on your credit rating, you can work hard to change your situation for the future. Once you improve your credit, you might even be able to refinance your current loan with a better option.