Banks Open Their Eyes To Women Entrepreneurs

Marketplace

Banks Open Their Eyes To Women Entrepreneurs

by Jeff Grissler

Not long ago, the only thing that seemed to exceed women entrepreneurs’ need for financing was the indifference with which bankers treated them. The fact is it was almost impossible for women to get money to start their businesses. Banks did not understand the beauty business, and the tanning and spa businesses were unheard of. As a result, many women were forced to finance their businesses using alternative— some might say desperate—means such as credit cards or loans from friends or family members; others lost hope of ever starting or expanding their businesses.

For women, it seemed there would never be a day when a banker would accept a business loan for a new salon or spa.

Banks finally are starting to understand that the tanning, beauty and spa industries are booming sectors and that more working women are driving the economy. Women-owned business are emerging and doing extraordinarily well. This has become a strong market for the banks, and they therefore must put more time and effort into lending to women entrepreneurs.

Why, after decades of struggles, have women suddenly shot forward in the capital game? Women business owners have become more savvy about banking matters and boast salons and spas that are extremely successful. As a result, the banking community has experienced an awakening. Banks have made tremendous efforts to reach out to women and have taken a proactive role in making monies more available to women starting their own businesses or who need capital for growth.

Banks through the Small Business Administration (SBA) have a simple mission: to secure financing for women entrepreneurs that might not be available through conventional bank financing. These loans are not centered around collateral but on the applicant’s character, credit, ability to repay the loan from earnings, experience in the salon and spa industry, and/or the evidence of management ability in the field.

Listed below is a breakdown of two SBA programs.

Micro-Loans: The micro-loan program provides very small loans to start-up, newly established or growing businesses. Under this program, the SBA makes funds available to borrowers in amounts up to $50,000. This program has a simple application and promises quick processing for this dollar amount. The funds can be used for the purchase of a tanning salon and equipment, inventory and supplies. The maximum term allowed for a micro-loan is six years. Interest rates vary and may not be fixed for the term.

Each intermediary lender has its own lending and credit requirements. However, those contemplating an application should be aware that the SBA will look to see whether the applicant has a good personal credit history; this is one of the most important factors in receiving approval for a micro-loan. The SBA will require the personal guarantee of the business owner. Micro-loans take little time to process—often less than a week.

Snap Shot Basic 7(a) Loan: This program serves as the SBA’s primary business-loan program to help small-business owners secure the financing they might not be eligible to obtain through normal business lending. This also is the SBA’s most flexible business-loan program, since financing under this program can be used for a variety of general business purposes. Loan proceeds can be used for most sound business purposes including working capital, the purchase of salon and/or spa equipment, fixtures, land and building— including purchase, renovation and construction—and debt refinancing.

Under this program, the SBA makes loans available from $50,000 to $1.3 million. There is a lengthy application process. The applicant must have two years of personal tax returns, a formal business plan precisely defining the business and identifying goals, a copy of the lease or the contract to purchase the property that will house the tanning salon or spa, and good business credit and good personal credit. The SBA also may require 10 percent to 20 percent of the loan down at closing. The approval process should take no longer than two weeks. The term of the 7(a) program is 10 years for the purchase of salon and spa equipment with improvements and up to 25 years for fixed assets. The interest rate varies for each loan.

When applying for a loan, be polite, persistent and prepared. Have all ducks lined up before going to the bank to submit a loan application.

The biggest mistake people make is admitting to the bank they don’t know how much money they need for their project. Be prepared to explain how much money is needed and how it will be used.

One of the most valuable aspects of the SBA is that it can assist entrepreneurs with the loan-application process. The organization has services online and free assistance at SBA locations to help a person put together a business plan and financial statements. This type of help, along with the wide array of SBA loans, gives entrepreneurs a chance to find the right loan for their businesses.

There has been a tremendous improvement in access to capital among women. It’s about time banks have gotten the message. This is not to say there aren’t still some barriers that banks must overcome. The banking world must be continually educated about the tanning and spa industries, and hopefully this will help future women entrepreneurs to obtain the financing they need to open the salon of their dreams.

Jeff Grissler is vice president of sales at Quest Resources, Inc., a financing firm that specializes in the tanning, beauty, spa and medical fields. For more information, visit www.salonfinancing.com.