The salon industry in the UK is bursting at its seams, with more and more entrepreneurs tapping into the beauty and wellness services – from hair transplants to spa therapies. But like any emerging enterprise, salons are ever so often in need of extra funds to manage cash flow, invest in new equipment and expand their service offerings.
Now there’s Merchant Cash Advance for salons – quick and flexible financing tied to your daily sales. In a competitive market, keeping up with the latest trends can feel like a race against time, and an MCA can give you the financial boost you need.
Why is merchant cash advance a good choice for salons?
A Merchant Cash Advance is a fantastic option for salons because it aligns perfectly with the unpredictable nature of the beauty industry. Unlike traditional loans, which require fixed monthly payments, an MCA offers flexible repayment terms based on your salon’s daily/weekly card sales. This means that during slower seasons, such as post-holiday periods, your repayments automatically adjust.
Another appealing aspect of an MCA for salons is the speed of access to funds. Salons would need quick cash to seize opportunities, whether it’s purchasing new salon chairs or stocking up on premium hair products. With an MCA, funds can be available in just a few days if you know how to link yourself with reliable MCA providers.
For example, imagine a hair salon owner who sees a spike in bookings during wedding season but needs additional equipment to meet demand. Instead of waiting weeks for a bank loan, they can quickly secure a Merchant Cash Advance for salons, use the funds to buy the necessary tools and repay the advance gradually as their bookings flow in.
According to a report by Allied Market Research, the Merchant Cash Advance market is growing at a CAGR of 7.2%.
Do you need a Merchant Cash Advance?
How can salons use merchant cash advance?
Hair and beauty salons can use MCA in numerous ways to fuel growth and manage daily operations.
1. Upgrade equipment and furniture
High-quality equipment is almost synonymous with the salon industry. Replacing badly worn styling chairs, purchasing new hair dryers or throwing in those luxury pedicure stations – an MCA would enable this change immediately. These improvements can help elevate the client experience, therefore making the salon more attractive.
2. Launch marketing campaigns
To stay competitive, salons need to promote their services all the time. Your salon can use an MCA to fund digital marketing efforts like social media ads, Google search campaigns, or email marketing. Investing in marketing helps to get new customers and keep existing ones engaged.
3. Diversification of services
Offering new services, such as targeted skincare treatments or specific hair colouring styles, will inevitably attract a fresh set of clients. Salons can use MCA funds to buy all the products needed for that new service, employ skilled professionals and train employees on the latest beauty techniques.
4. Open a new location or renovate
For salons in growth mode, a Merchant Cash Advance provides fast access to needed capital that helps them open additional locations or renovate existing spaces. Additions to treatment rooms, improvements to waiting areas, or even expanding into a new neighbourhood – all will take quite a bit of capital, and traditional financing may not always move fast enough.
5. Stock up on nice products
A salon can increase revenue by retailing premium beauty products. Through the use of an MCA, they can invest in high-end hair, skin and beauty care products so they can sell them to their clients. In addition to increasing revenue, a stocked retail section also allows for building of brand loyalty as well.
With all these strategies, salons are enabled to grow their business with the support of merchant cash advance companies in a manner that is efficient and effective.
How to apply for a merchant cash advance for salons?
Applying for an MCA for salons in the UK is a relatively straightforward process compared to traditional loans.
1. Ensure your salon meets eligibility criteria
Unlike bank loans, MCA focuses on your salon’s daily credit and debit card sales rather than your credit score. To qualify, most MCA providers require:
- Consistent monthly credit card sales.
- A minimum of 6-12 months of operational history.
- No recent bankruptcies or significant financial red flags.
2. Submit necessary documents
This includes your bank statements for the past 3-6 months, credit card processing statements and business identification information such as your business license number and tax identification number.
3. Choose the right MCA provider
Not all MCA providers are the same, and it’s important to find one that understands the specific needs of salons. Look for good Merchant Cash Advance companies that offer reasonable factor rates and flexible repayment terms. If you face difficulty in finding them, you can always contact ComparedBusiness for that. We link you with top MCA providers in the UK without any service charges.
4. Review and negotiate the terms
Once approved, the provider will offer you an advance amount based on your sales volume. They will also provie a factor rate, often between 1.2 and 1.5, which determines the total amount you’ll repay. It’s essential to review the terms before finalising the contract. Once finalised, the funds will reach your business account within 24-72 hours. Quick, right?
According to The Britain MCA Association, lenders will advance from £2500 to £300,000 conditionally linked to turnover.
Difference between merchant cash advance and loan
As mentioned above, MCA is different from traditional bank loans.
- Repayment structure: MCAs are repaid through the percentage of daily sales. Traditional loans have fixed monthly payments, regardless of income fluctuations.
- Qualification requirement: MCAs rely heavily on daily/weekly credit card sales which makes them accessible to businesses with poor or limited credit. Loans, however, require a strong credit score and a longer approval process.
- Funding speed: MCAs offer rapid access to funds, often within 24-72 hours. Traditional loans take longer to process.
- Cost: MCAs use factor rates, which generally result in a higher cost of borrowing compared to loans that use interest rates. The APR for MCAs can be much higher than for standard loans.
| Criteria | Merchant Cash Advance | Traditional loan |
|---|---|---|
|
Repayment structure |
Percentage of daily sales |
Fixed monthly payments |
|
Qualification |
Based on daily credit card sales
|
Requires strong credit score and collateral
|
|
Funding speed |
24-72 hours
|
Several weeks to months |
|
Cost |
Higher factor rate, often higher total cost |
Lower interest rates, lower total cost |
Considerations when choosing merchant cash advance companies for your salon
1. Regulatory compliances
MCA providers are not regulated in the UK by the Financial Conduct Authority. This means you should be keen on looking at the terms and conditions. Make sure the provider can offer full disclosure on fees and terms of payment before you obtain money.
2. Factor rates and fees
MCAs are usually more expensive than loans and the factor rate can have a huge impact on the total amount you pay back. Shop around for the offers of different Merchant Cash Advance companies and negotiate for the best possible rate. Be wary of hidden charges as well.
3. Flexible repayments
This is by far the biggest advantage of an MCA. However, understand how the holdback percentage operates. A high holdback rate can put strain on your cash flows, so you need to make sure the terms can work with your salon’s revenue fluctuations.
4. Reputation
Research the reputation of the MCA provider. Look for reviews from other UK-based salons to judge the reliability of the company and its customer service. A good reputation from the provider will save you from nasty surprises in the future.
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