One of the hardest parts of starting your own salon business is raising the finance. Whilst the range of options and requirements can seem overwhelming at first, it’s important to do your research and get all your facts straight before you move ahead.
Take a trip to the Bank
You need to thoroughly explore this option as your first port of call for raising finance but be warned as in this current climate only thorough and well thought out propositions will succeed.
Wandering into a bank to speak to a new business manager with an idea and a dream won’t work! Before you go to your bank you have to get your business plan and cash flow forecast absolutely water tight. Take it from me, it will serve you well in the long run even though this part is time consuming.
Loads of preparation is needed before approaching any organisation that could potentially lend you money. You will need to compile a record of your personal an/or business bank accounts and details on other loans you or your business might have. Your cash flow needs to be honest highlighting peaks and lows with in your trading forecast – and be honest! Banks are not daft they will all have a grasp on what seasonal performances look like for different industries.
You also need to focus on raising the best possible capital that you can. I would ask an accountant or book keeper to help compile your cash flow forecast so that it looks professional and, most importantly, is as accurate as possible.
TIP: Seeking out professional help will reflect well and demonstrate a willingness to use professional services in areas that are not so familiar to you.
Don’t be afraid to ask for help
As a back up to a business loan you may like to try approaching members of your family or close friends as these are the people most likely to have faith in your ideas and to want you to succeed.
Borrowing from a friend or relative is generally the most readily available source, especially when the capital requirement is smaller. If you do borrow from a personal source it is essential to draw up a formal agreement and put the terms of the loan in writing using the services of solicitors to avoid putting any strain on the relationship and it is important to view your friends and family participants as business associates running alongside your personal association with them so basically no one feels taken advantage of further on down the line.
TIP: Offer to repay them through profit sharing and put it all in the formal agreement. Reach out to professional organisations for help
Start Up Direct
• lends up to £5,000 unsecured
• will lend to start ups with no previous trading history
• is open to any age
• offers 6% interest rate compared to about 9.3 % with banks
• up to five years to pay back
• business support is free
The aim of an organisation like Start up Direct is to give people the opportunity to open their own businesses on an unsecured basis. While the amount of money available will probably not be enough to open a hair salon, it may run in conjunction with other lending routes and it’s a great way to drop the amount of capital you need to borrow from banks.
TIP: Log onto www.businesslink.gov.uk Here you will find plenty of useful information on grants, finance, sources of help, ‘how to’ guidance and reference points.