Financing For Nail Salons
The cosmetic and nail industry as a whole in the United States generates a revenue of over 62.46 billion dollars today. The United States is also the biggest cosmetic market in the world. The cosmetic industry, and nail salons in particular, are a unique business to be in since they are not dominated by one age demographic, meaning people of all ages want access to nail salons and beauty products. However, this industry definitely has more women consumers than men. As of May 2016, the nail salon industry has been ranked as one of the top industries for women to work in. Modern nail salons and spas have started to transition into top of the line and cutting edge establishments, driving recent industry revenue gains. This is leading to a drastic increase in employment for women in the nail salon industry sector. According to this recent nail salon study, “Hair and nail salons in the United States continue to represent an opportunity for female entrepreneurs, particularly because an estimated 85 percent of industry employees are women, which gives would-be female business owners an opportunity to learn the nail industry from the inside before opening establishments of their own”.
Nail Salon History
Like other industry sectors, the nail salon industry took a large hit and saw a major decrease in customers during the 2008 recession, however an improving economy is driving consumers back to the nail salons. While we are seeing positive growth in consumer participation in nail salons, the nail salon industry is still reeling from the effects. When people had limited miscellaneous capital to spend, women resorted to becoming creative and thrifty, resulting in a drastic increase of at home nail creations. As mentioned above, plenty of people are shifting back to going to nail salons, but there were many nail salons that did not make it during those difficult times.
Another major industry trend that is effecting the nail salon industry is the demand for better treatment and wages for all of those employed in the nail salon industry. A recent nail salon investigation led by the New York Times has led to proof of underpaid, exploited, and abused manicurists in the nail salon capital of the country, New York. According to the New York Times, “Last year  the New York State Labor Department, in conjunction with several other agencies, conducted its first nail salon sweep ever – about a month after The Times sent officials there an inquiry regarding their enforcement record with the industry. Investigators inspected 29 salons and found 116 wage violations”. Many of these business owners claimed they must pay low wages in order for their businesses to stay afloat, so many consumers are now realizing that they will have to pay higher prices for quality establishments. These recent revelations are making consumers more conscientious about which nail salons they are choosing to bring their business to, making this diverse market much more competitive for the higher-end nail salons that can prove their reputability.
Emerging Trends in the Nail Salon Industry
As mentioned above, there are many trends and revelations in the nail salon industry that are leading to a major shift in how the industry works and who consumers are willing to pay for their services. With a demand for higher end and better quality nail salons comes a need for extra accessible capital; considering the variety of loan options for your nail salon could be vital in staying afloat and competing in the emerging nail salon industry. There are a multitude of financing and loan options, such as traditional bank loans, SBA loans, lines of credit, and alternative loan options such as merchant cash advances.
Why Would a Nail Salon Want Financing?
- Payroll should be one of the top concerns on every nail salon business owner’s mind right now. With the controversial article put out by the New York Times, many people are no longer willing to pay cheaper costs for manicures, pedicures, and specialty nail designs. Consumers are going to pay the higher costs associated with above board salons. According to Fashionista, “What seems obvious is that it’s going to rightly cost consumers more for nail services going forward, whether you start tipping your local nail tech a ridiculously high percentage or you go to a more above-board legal salon”. However, sometimes meeting these necessary expenses can be tricky. Reviewing all available financing options for your quality nail salon can help.
- Going green and providing all natural products are another major trend emerging in all industries across the board, but especially for nail salons. There is long existing evidence showing the negative health effects of working in the nail salon industry, as well as using those products. Many nail salons are starting to offer premium nail polishes and products that are vegan, contain natural oils, and “free from” chemicals. None of these all natural products are cheap, so many nail salons could benefit from the different loan and financing options available to your small business to help make this transition.
- Social media is a necessity in every business today, but for the nail salon industry it is vital for reaching a new and more diverse customer base. A recent nail study shows that 92 percent of all nail technicians are on Pinterest, and a rising rate of 32 percent of nail technicians are on Snapchat. Instagram is also dominating the nail salon industry, because pictures of products and services always gain more likes and followers than articles. Utilizing traditional or non-traditional financing options can help with finding a marketing agency that can help a nail salon owner understand and implement these strategies effectively into their growing business.
- New equipment is always something that a nail salon needs to purchase. Whether it is replacing old or broken equipment or implementing new top of the line equipment to over more services and nail design techniques, equipment financing is a must.
- New techniques and specialty nail design are at an all time high right now. Customer’s do not want to waste money on something they can simply do at home. While this is a major aspect for nail salon businesses to stay on top in this competitive industry, overhead fees and training costs can be expensive. Reviewing the different loan options available to your nail salon are essential to beat the competition.
- Ading Services make the nail salon much more profitable. Some of these services include waxing, hair, and even massages! The more services a nail salon can offer, the more people are willing to come spend their money at your establishment. However, having staff that is trained and certified in all of these different areas can be tedious and expensive, so considering financing support can help.
- Expansion is something every business likes to keep in mind, especially when business is booming. However, expansion can be difficult to achieve when there are so many other expenses to running a nail salon. Discussing different loan options could be the solution to your problem.
Types of Nail Salon Loans
|Line of Credit
|1 – 3 years
Nail Salon Bank Loans
Nail Salon SBA Loans
If you are a nail salon owner who has been unable to secure traditional bank financing, the next best option would be a nail salon SBA loan. SBA financing are business loans provided by traditional lenders where the Small Business Administration agrees to cover lenders losses if the nail salon fails to completely repay their SBA financing.
- Rates: 6-8%
- Terms: 3-25 years
Alternative Nail Salon Loans
Alternative nail salon loans are popular financing options for salons that are unable to secure traditional financing. Unlike bank loans, alternative nail salon financing has much lower credit, profitability and document requirements. And unlike traditional lenders, an alternative loan can fund in a matter of days, not weeks and months.
- Rates: 8-25%
- Terms: 1-5 years
Salon Merchant Cash Advance
A nail salon merchant cash advance is the sale of a company’s future credit card processing transactions in return for immediate financing. The MCA lender will provide the financing and will remit a percentage of each day’s credit card transactions. An nail salon ACH loan is similar to a MCA advance, the only difference is a set repayment is made each day via business bank account ACH.
- Factor Rates: 1.16
- Terms: 3-24 months