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How to get funding for a hairdressing business

Published on 18th July 2019 - Last update on 19th February 2020

There are more than 30,000 hairdressing and beauty salons in the UK and, if you have the necessary skills, you could join them.

But while you could find yourself running a business with the potential for big profits, you will certainly find that opening a new salon will require long hours and hard work - along with a hefty injection of capital.

The good news is that getting funding to set up and grow a hairdressing business can be straightforward - if you know where to look to get the right support. 

“I had been managing a salon for nearly five years, and I knew how to do it profitably. What I didn’t know was how I could find the money to start a salon of my own. Rangewell showed me the answers.”

What do I need to get funding?

Lenders make their profits from lending - so they want to lend to successful businesses. For them to want to lend to your business, you need to persuade them that your hairdressing salon - or mobile business - really will be a success. 

This is much easier to do if you understand what lenders take into account when making their decisions. Although the criteria for each finance solution can vary greatly, what lenders want to be sure of is always the same - that your business can afford the agreement it's offered.

If you think about it, this can be easy to prove if you already run a business. Lenders will request to review such details as your recent and past bank statements, annual turnover, revenue forecasts and your credit profile (business and personal).

So, if you’re able to demonstrate that your business is financially robust, it could let you borrow more funds and enjoy more favourable interest rates.

But what if you are setting up a new hairdressing business? Things are little more complicated, and lenders will see you as more of a risk because they don't have the confidence that comes from seeing a healthy set of accounts stretching back a year or two. Sadly, some won’t want to lend to start-ups at all.

Fortunately, at Rangewell, we know those that will. You may have to pay a higher rate to get the funds you need - and you will definitely have to provide a detailed business plan. This, as the name suggests, is a detailed view of your intentions for your business, showing how you will spend money and how you will make it. You will need to show the weaknesses as well as the strengths of your business proposition, and show things like your own skills - if you have run a hairdressing business before, for example, it would be a major plus for your proposition.

“Writing a business plan was not easy, but once I made my mind up, I saw how it could help me plan ahead for things. Once I was finished, I was even more confident that I could be running my own business.”

We have advisors with experts in the sector who can talk to you about your business plan, and help you find the lenders who are most likely to be impressed by it.

To improve your chances of gaining a suitable agreement for your business, always check what lenders are looking for and get all the necessary documents ready beforehand. If you're struggling, we can always help explain just what is needed. 

Getting the right type of finance

Premises

However, it's important to remember that it's not enough to simply borrow money to set up your hairdressing business - you need to get the most appropriate type of finance for each business purpose in order to save money. 

So, for example, you may be able to use a Commercial Mortgage to buy a suitable property for your salon, or even to buy an existing business. These are secured, long-term finance solutions that can last 20 years, or more with high-value properties, during which time you’ll need to make fixed monthly repayments, plus interest - just like a personal mortgage.

Looking to start your own salon or take over an existing business? Apply for funding today or find out more about finance for beauty salons and hairdressers

Equipment

Your equipment will also need to be another consideration. Your equipment needs may not seem too large on the surface, but a backwash, mirrors, chairs and even air conditioning all have to come from somewhere. For this kind of equipment, many salons find Asset Finance can provide the flexibility they need. With this type of finance, your salon could benefit from products like Hire Purchase or leasing - but when should you consider each? 

Hire Purchase

Hire Purchase allows you to spread out the total cost of most types of hairdressing equipment over an agreed term up to 60 months. The lender purchases the equipment from a trusted supplier on your behalf, you pay an initial deposit (usually around 10% of the total purchase price, including VAT), which can be reclaimed on a quarterly basis when you file your tax returns. As soon as this has been paid, you can start using the equipment, and make fixed monthly repayments throughout the agreement, to cover the cost plus interest. Once you’ve settled all of your payments to the lender, you become the owner of the equipment. This is great for equipment that you want to own in the long-term because it will allow you to pay for it over time.

Leasing

Leasing allows you to borrow equipment for your salon over an agreed term which can last up to 5 years. During this time, you’re required to make fixed monthly rental payments, plus interest. When the agreement matures, you can choose to either return the equipment, extend the term or upgrade to another model. This type of finance is great for high-cost items which go date quickly - some types of beauty treatment devices might be well-suited to leasing.

Business Loans

For other costs, you might look at a simple Business Loan. These are usually either Secured or Unsecured and offer you access to a cash lump sum. A secured business loan could help you to borrow between £5,000 - £1,000,000, but you will need to provide something valuable as ‘security’ which you would have to give back if you did not keep up repayments on your agreement. 

On the other hand, unsecured business loans don’t require the use of collateral and can offer your salon anything between £5,000 - £250,000, but these agreements typically carry more interest compared to a secured agreement. 

With either option, you make fixed monthly repayments to the lender throughout the term of the agreement, plus interest.

“My business is cutting hair - not high finance. That’s why it really helped to get some expert help from the Rangewell team. They explained things, they helped me with my applications - and they found me the money I needed.”

Dealing with operating costs

Don’t forget, it costs money to run your business - even when customers are slow in coming in. 

You will have council tax and utility bills to pay and you almost certainly need to advertise to bring in new customers. A professional website also works wonders to showcase what you can do - and even take online bookings. 

But your biggest cost will be your staff. there is no getting around that you will need qualified people. Most insurance providers won’t cover your salon unless your stylists have a Level 2 or 3 NVQ, or exam equivalent. A friendly approach and good personal presentation are important too – customers want to sit down with a friend as well as to look good afterwards.

Working Capital Finance is a type of short-term funding that will help you deal with the costs while your new hairdressing business establishes itself. 

Buying an existing business

Instead of setting up a new business, it may be advantageous to look at buying an existing hairdressing business.

Costs are higher than starting out - but there are also some big advantages.

You are acquiring a business that is profitable from day one so there is no need to wait for an adventurous first customer to come through the door. In this scenario, your business should come with a full appointment book that can offer immediate returns.

Knowing the profit that can be expected will also help convince potential lenders that your plans are viable. 

Another advantage is that there are no hidden costs - you pay more to buy an existing business, but there will be no extra costs to cover, and even your operating expenses can be precisely known.

A Secured Loan could help you to borrow the large sums required for a buy-in our buyout of an existing business.  Plus, you might also consider something called ‘jigsaw’ funding. This is a bespoke finance package, made up of a number of loan types, such as a Commercial Mortgage for the premises for example, with another loan to cover goodwill, and Asset Finance for your salon equipment - from chairs to dryers.

Dealing with the costs

Covering all the costs of starting your beauty salon with your own money simply isn’t possible for most people.

“You probably have savings - I did - but you probably don’t have anything like enough to set up a business. That’s why you need Rangewell to help.”

At Rangewell, we work with salons across the UK, and we know the challenges of setting up and operating a hairdressing business. We also know the lenders who are most likely to help you answer those challenges.

We provide a personal service, working with you to determine the kind of lending you need for each purpose - and then finding the lenders who can offer you the funds you need at the most competitive rates. So if you're looking to become your own boss, find out more about what we can do for you here - our services are free.


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Richard Mitchell

Richard Mitchell

Content writer
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