Take a microloan to grow your hair business
Today I received a phone call from a woman from North Carolina who had an awesome idea for a beauty and hair store. She has the idea, she knows the market and she already found the suppliers. A microloan might be the solution to bring her idea to a full fledge business.
What is a microloan?
In short a microloan is a loan for businesses, with an available amount up to $ 50,000. These loans, usually have short repayment terms and may have a specific interest rate and conditions.
These microloans are a great financing instrument for startups in the hair and beauty business.
The borrower will get a lump sum that she or he pays back with interest via regular payments over a set period of time. The main difference is that for a microloan the amount is usually smaller. A microloan is often paid back over three to six years.
For most financial institutions microloans are less profitable because for a smaller amount they require the same level of management as a larger loan. Often microloans are funded through a network of nonprofit, community-based organizations with a certain target audience in mind. For example, to provide funding to women, low-income, farmers, veteran and minority entrepreneurs.
This all makes the microloan an interesting financing instrument for start-ups in the hair business. The hair and beauty business, is not only a working place for mostly women, it also drives by the money spend by women. Thus it makes sense to support the growth of the hair business by special loans for women.
How to get a microloan
To get a microloan you need to have a business plan that is supported by figures. The business plan for your hair business should show the growth potential for your business and the cash flow the business will generate. The cash flow should be enough to repay the loan and to grow the business. You can support your business plan with evidence of people interested to buy your hair products for example.
Every lender has their own application procedure, but it is good to prepare your self before asking for a loan. Share with some people your plans to start your business, and ask for their feedback. This will help you to build a stronger case for your application when you talk to the loan officer.
Where to go for a microloan
There are many institutions that offer microloans (direct or through their network, like for example SBA). The institutions include government agencies, peer-to-peer lenders and community-based organizations. For the interest rate an indication is given, consult the lender of choice for the current interest rates.
SBA microloan
Amount: Up to $50,000
Interest rate: 8% to 13% (as of Feb. 10, 2022)
Terms: Up to 6 years
The SBA microloan program is administered by a network of community-based organizations across the nation.
Accion Opportunity Fund
Amount: $5,000 to $100,000
Interest rate: As low as 5.99%
Terms: Depends on the loan
Availability: Nation wide
The Accion Opportunity Fund, is part of is Accion’s small business lending program. This loan is less interesting for start ups in the hair business because the applicant must have at least 12 months in business. The hair and beauty business must generate $50,000 or more in annual sales and the applicant must own at least 20% of business.
Kiva microloan
Amount: Up to $15,000
Interest rate: 0%
Terms: Up to 36 months
Availability: Nationwide and also in countries in Africa like Kenya, Nigeria
As a nonprofit dedicated to expanding access to capital, Kiva uses a crowdfunding model to offer small loans with of 0% interest. Potential borrowers must prove their creditworthiness by getting friends or family to lend to them, after which they can appeal to the public with a crowdfunding campaign. The borrower makes a small presentation and lenders can support with amounts as small as $ 25 to support the initiatives.
Grameen America
Amount: Average loan size $4,800
Interest rate: 15% to 18%
Terms: 6 months
Availability: 22 cities across the US, mainly in New York and North Carolina
Grameen America offers microloans, financial education and support networks targeted to U.S. women. Women participate in training to learn about loans, saving and credit and receive a microloan to build a business. In June 2022 they started a partnership with Jennifer Lopez to target Latina entrepreneurs.
Example is Glamorous Nails and Beauty from Rasoura Since receiving her first loan of $2,000 three years ago, Grameen America has invested over $12,000 into Rosaura’s salon.
A loan for your hair and beauty store
Do you want to start or grow your own hair and beauty business like Rosaura, perhaps even with your own staff. Start with writing your ideas down in the business plan and check for a lender with a microloan for women.
Let me know in the comments below if you would like to apply for a microloan to start your business.
