Dance School Working Capital
Running a dance studio, and a successful one at that is not an easy venture. Professional dance studio owners are faced with the realization that it is not enough to be a skilled dancer; but now add teaching, human resources, budgeting, and marketing to your skill set. Though, what is most essential is the ability to enroll students in classes, workshops, and lessons consistently. It is recommended that individuals interested or involved in this industry should be highly skilled in dance techniques, sales and skills training, business, and modern studio marketing.
Quick-jump to the following sections:
- Bank Loans
- SBA Loans
- Unsecured Line of Credit
- Alternative Loans
- Merchant Cash Advance
- ACH Cash Advance
As with marketing, the strategies that dance studios will have to focus on will significantly depend on national and local trends. Economies have been recovering, and it has shown that people have more money to spend on health, fitness, and leisure activities. Young students, children, parents, and even elderly or senior citizens all have become more interested in enrolling in professional dancing classes. For example, when Zumba made its way into the fitness field in 2008, dancing began being taken as a serious fitness activity. Thus, dance studios caught on to the trend and started presenting lessons as not only a performing art but an exciting and fun way to get active and fit. Dance academies have been growing more and more and have a higher likelihood of being found in your local area. Also, diversification has been a mantra for dance studios as most of them now are teaching a variety of styles including swing, ballet, jazz, ballroom, waltz, tango, samba, and disco. People have been joining these dance studios alone or in groups with their friends and family and marketing has capitalized on these trends that have grown tremendously popular.
Another trend that has contributed to the success and growth of dance studios is the placed importance on health and fitness as more relevant than body image. Surveys have shown that over 50% of woman that enroll in dance lessons cited ‘improving health’ as their primary reason for attending the classes. While others have quoted 54% improved fitness level and another 54% wanted to maintain or lose weight. Additionally, the woman between the age of 16-25 years reported that they mainly danced to stay fit and not keep up a body image that is so regularly depicted by the media. Although, the barriers that dance studios still face regarding body image is the high degree of hesitation among those that cited not feeling fit enough as a reason for not taking dance lessons. There were other groups that felt they lacked the rhythm and coordination that dancing required. The lower end of the group felt embarrassed or too body conscious to dance in a group. Therefore, what dance studios can do is to focus on wellness, de-stressing, fitness, and having fun instead of concentrating on a single topic such as weight loss or toning. Companies should advertise their dance lessons as being an ideal combination of fitness and entertainment. Along with the stress reduction aspect to present an overall well-being that is created from it.
Furthermore, the changing demographics have impacted the marketing for dance studios. As women become older, surveys had shown that woman became less conscious of their body image than when they were younger. Plus, after the declaration of obesity as a disease in the US, the youth has become more fitness conscious. Studio marketing should incorporate these changing demographics into their product plans and marketing campaigns. They can attain this by organizing specialized packages for people over 60 years of age and focus on middle-aged and older woman as part of their dance schools marketing plans since they are more likely to overcome the hesitation and body image barriers than a younger woman. Lastly, it is wise to market the classes to appeal to new student’s—the fitness conscious youth. However, with a younger crowd comes a limited income; thus it would be advised as a good marketing strategy to alter the pricing and provide affordable lessons with student discounts.
Lastly, marketing the importance of socializing is also crucial. The consumers today interact in real and virtual worlds. Therefore dance studios should place emphases on marketing strategies that target both these spheres. Observation of this industry has shown that building online communities where you can share dance videos and tutorials with old, new, and potential clients help to manifest your particular brand image and bond between consumers. This exposure leads to word of mouth, reviews, and testimonials and referrals. It is known that services and products recommended by family and friends are considered more trustworthy and reliable than those promoted through direct marketing and advertising. For that reason, individuals involved in this industry should target social media avenues as their main source of marketing and way in which they present their brand.
Types of Dance Studio Loans
There is no shortage of financing options for small businesses seeking financing – especially dance studios. Whether you are looking for conventional financing or alternative financing, its important to understand what options are available. Below we’ll look at the most common types of financing offered to dance studios and dance schools.
Bank Dance Studio Loans
A loan from a conventional bank or credit union is the most preferred type of business financing for dance studios. Why? Because banks offer the lowest rates of all business financing options. Additionally, bank term loans have the longest terms and lowest fees among funding options. Dance studios use bank term loans for purchasing real estate, refinancing and consolidating business debt, dance studio working capital, marketing and advertising, and just about any business use.
SBA Dance Studio Loans
SBA lending is a specialized type of conventional financing that involves obtaining an enhanced loan administered by the Small Business Administration. The SBA doesn’t actually provide the dance studio with the SBA loan, but relies on a conventional lender (banks, credit unions, community lenders) to provide the loans, and the Small Business Administration agrees to cover most of the SBA lender’s losses if the dance studio fails to repay their loans.
Alternative Dance Studio Loans
For dance studios that have tried to obtain financing using more conventional lending options, but have been unsuccessful in securing financing, the next best option would be to obtain a non-bank alternative business loan. A midprime business loan is generally used for working capital purposes with terms that are shorter than bank loans, but longer than higher-interest merchant cash advances. Additionally, an alternative business loan requires less documentation and funds much faster than a bank loan or SBA financing.
|Collateral||May not be required|
Unsecured Lines of Credit
An unsecured line of credit is a way for a small business or dance studio to access funds that have already been preapproved by a lender. Since the funds have been preapproved, the dance studio can use the funds whenever they need them and can use the unsecured loan or line of credit as they wish.
|Rates||0% APR for 12 months|
Dance Studio MCA Cash Advance
For dance studios that process lots of credit card payments from their students, a good option to obtain fast business capital is to get a merchant cash advance. This form of dance form financing is especially useful for dance studio owners with bad or poor credit. A cash advance for a dance studio isn’t actually a loan, but the sale of the dance studio’s future credit card sales in order to get an upfront lump-sum financing. Once funding occurs, the funder is repaid by splitting a portion of the dance studio’s credit card sales until the advance is repaid.
|Rates||1.10 – 1.50|
Dance Studio ACH Advance
Almost identical to a MCA cash advance, an ACH cash advance is also the sale of future receivables to a funding company in order to get an upfront lumpsum of cash. The difference between a MCA cash advance and a ACH cash advance for dance studios is the way the merchant funder is repaid. Whereas with a MCA advance, the funder splits credit card sales with the merchant, but with an ACH cash advance a set payment is taken each business day from the business bank account using Automated Clearing House until the advance is repaid.
|Factor rates||1.10 – 1.50|
|Fees||Low to High costs|
As you can see there are many options that can cover most dance studios’ needs. The key is to find the right financing that fits with the growth plan of your dance studio. Understanding all the various options is key, but also is the ability to connect with the right lenders that offer dance studio financing. If you are a dance studio owner who is seeking financing for your company, and need help obtaining financing, please reach-out to one of our specialists, and we’ll help you obtain the best possible financing.