Running a salon or spa can be extremely rewarding, but it also comes with its fair share of challenges. One of the biggest hurdles for many salon and spa owners is having enough working capital to keep operations running smoothly. When cash flow gets tight, it can be tempting to put off investing in things like new equipment, inventory, marketing, staffing, and growth opportunities. This is where merchant cash advances can come in handy.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of financing where a company provides a business with an upfront lump sum of cash in exchange for a percentage of future credit card sales. It’s not technically a loan – there’s no set repayment schedule or fixed interest rate. Instead, the salon repays the advance through small daily or weekly deductions from their credit card receipts over a fixed period of time, usually 4-12 months.The amount advanced is typically based on the salon’s average monthly credit card volume. So for example, if a salon processes $20,000 per month in credit cards, they may qualify for an advance up to $100,000. The salon would then repay this by having a percentage – let’s say 15% – deducted from their daily credit card receipts until the full amount is repaid.The main advantages of merchant cash advances are:

• Fast approval and funding – money can be in your account in as little as 24-48 hours
• No collateral required
• Flexible daily/weekly payments based on credit card volume
• No fixed repayment schedule – pay more when business is good, less when slower
• Funds can be used for any business purpose

This type of financing can be a lifesaver for salons struggling with cash flow issues. An infusion of working capital can help bridge gaps in slow periods, allowing you to keep paying staff and expenses without interruption. The flexible payments help match repayment to the natural ups and downs of business cycles in the beauty industry.

MCA Uses for Salons and Spas

Salon and spa owners use merchant cash advances for a wide variety of purposes. Here are some of the most common uses:

Purchasing Inventory and Supplies

From shampoos and conditioners to towels, waxing supplies, and more – inventory and consumables represent a major cost for salons and spas. An MCA provides an upfront lump sum that can be used to stock up on everything you need to properly service clients.

Marketing and Advertising

Customer acquisition and retention is critical for success in this industry. An infusion of working capital can help fund print, radio, TV, and online marketing campaigns to bring in new clients. It can also help retain existing customers through loyalty programs and promotions.

Hiring Staff

Stylists, massage therapists, estheticians – skilled staff is the lifeblood of a successful salon or spa. When opportunity arises to bring on talented new team members, an MCA can provide the funds to get them on board quickly.

Purchasing Equipment

The latest salon chairs, massage tables, skincare devices, wash stations, and other equipment can enhance service offerings. But these items are often expensive to purchase upfront. MCA funds can help get the equipment you need to take your services to the next level.

Renovations and Expansions

When the time comes to renovate your existing space or expand into a larger location, traditional loans can take months to secure. An MCA provides fast access to capital that can be used to upgrade flooring and lighting, add treatment rooms, or even open an additional location.

Covering Payroll and Expenses

Cash flow ebbs and flows in this industry. When things get tight and you’re faced with covering payroll, rent, utilities, and other fixed costs, an MCA injection can help fill the gap and keep day-to-day operations running smoothly.

Taking Advantage of Opportunities

When time-sensitive opportunities pop up – like attending a trade show, buying out a competitor, or bringing on a high-profile stylist – delayed financing can mean missed opportunities. MCA funds can be deployed quickly to help you capitalize on growth opportunities.As you can see, merchant cash advances offer a versatile source of financing that can be used to overcome a variety of business challenges. And because payments adjust to match cash flow, the flexibility helps weather seasonal dips in revenue.

Qualifying for an MCA

While specific requirements vary between MCA providers, here are some of the most common criteria used to qualify salons and spas for merchant cash advances:

• Time in business – Most providers require at least 1 year in business. Some may accept startups on occasion.
• Credit card volume – Monthly credit card sales are used to determine approval amounts. Minimums vary but often around $5,000/month.
• Credit score – Personal and business credit are checked, but MCA relies less on credit than traditional loans. Requirements vary by provider.
• Financial history – Past bank statements are used to verify revenues and qualify amounts. Steady history helps approval odds.
• Type of business – Salon and spa businesses are commonly approved for MCAs. Retail shops may have a harder time qualifying.
• Processing method – MCA repayments are taken as a percentage of credit card receipts, so salons need to process cards and not be cash-only.

The application process is relatively simple – often just a short online form requesting basic business and owner info, bank statements, and possibly a credit check. Approvals can come in 24-48 hours and funding in as little as a few days, offering a much faster turnaround compared to conventional small business loans.

MCA vs Salon Business Loans

So how do merchant cash advances stack up against some other small business financing options for salons and spas? Here’s a quick rundown of the pros and cons of MCAs versus conventional loans:Merchant Cash AdvancesPros:

• Fast approvals and funding
• Flexible payments tied to cash flow
• No collateral required
• Funds usable for any purpose
• Less reliant on strong credit

Cons:

• Higher cost than conventional loans
• Daily/weekly payments can be burdensome
• Only an option if you accept credit cards

SBA LoansPros:

• Low interest rates
• Long repayment terms
• Large loan amounts available
• May not require collateral

Cons:

• Strict eligibility requirements
• Extensive paperwork
• Long approval process
• Must prove loan necessity

Bank LoansPros:

• Competitive rates
• Fixed monthly payments
• Establish banking relationship

Cons:

• Lengthy application process
• Strong credit often required
• Collateral may be required
• Restrictions on use of funds

Lines of CreditPros:

• Access funds as needed
• Only pay interest on what you use
• Can replenish as you repay

Cons:

• Requires strong credit
• Lower loan limits
• Uses restricted to working capital

As you can see, each financing option has its own pros, cons, and use cases. Many salon owners opt to use merchant cash advances for their quick funding and flexibility, while using loans for larger, long-term investments.

The MCA Process From Start To Finish

If you’ve decided that a merchant cash advance is the right financing option for your salon or spa, here is a step-by-step overview of the process:1. Choose an MCA Provider

• Research and compare MCA companies
• Check customer reviews and complaints
• Requirements and rates will vary – shop around!

2. Check Eligibility and Apply

• Confirm you meet the provider’s requirements
• Fill out a simple online application form

3. Get Approved

• Approval decision in 24-48 hours
• Underwriting will verify business info and credit

4. Review the MCA Agreement

• Carefully review terms, rates, and fine print
• Understand the repayment process and deductions

5. Accept the Agreement and Get Funded

• E-sign the MCA agreement
• Funds wired to your business account quickly

6. Use the Funds As Needed

• Spend MCA funds on any business needs
• No restrictions on how funds are used

7. Repay via Credit Card Receipts

• MCA provider deducts fixed percentage each day/week
• Repaid in 4-12 months based on volume

And that’s it! Within a week or two, you can have the financing you need to take your salon or spa business to the next level.

Tips for Salon and Spa Owners

Here are a few tips to make the most out of using merchant cash advances for your beauty business:

• Only use what you need – don’t take more than you can comfortably repay
• Be conservative with projections – overestimating sales hurts repayment ability
• Use funds strategically – invest in growth, not just daily expenses
• Make payments a priority – don’t let deductions exceed limits
• Pay down faster when possible – saves on total interest paid
• Have a plan for repayment – don’t rely on refinancing the balance
• Review statements regularly – catch any issues early

Used strategically and conservatively, an MCA can be an invaluable source of funding for salons and spas. Be sure to understand the terms fully, budget carefully, and have a plan for prompt repayment. With the right approach, merchant cash advances can help take your beauty business to new heights!