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About Loan for Beauty Parlours
A beauty parlour is a very attractive business opportunity to entrepreneurs. The Beauty Salon landscape has grown by leaps and bounds across the country. There is a huge need for beauty professionals who can offer high quality customized services to their clients.
Since beauty salons are a personal service sector, hygiene and quality equipment plays an important role while setting up a beauty parlour. Adequate funding is required to meet the quality standards and client expectations. Apart from renting or owning the premises for a beauty parlour, the business owner is compelled to spend a considerable amount on the latest trending tools and equipment.
The Government of India has various schemes to support small and micro business units. There are schemes that are generally available for small and medium enterprises and a few schemes preferential to beauty parlours.
Type of loans available for Beauty Parlours
A beauty parlour falls under Small & Medium Enterprise or a Micro Unit Enterprise. Both these categories have some attractive financial options. The loans are offered under two categories
- Term Loan :
- Working Capital Loan :
This financing option can be used for owning the premises or to buy tools and equipment. Term loans can be in the form of short-term loans or Line of Credit.
This financing option helps in meeting the expenses of running the business.
The applicant has to work out a clear budget before applying for a loan. Specifying the reasons and the needs for the loan speeds up the loan processing. It also avoids over-borrowing.
Understanding the eligibility criteria of Loans for Beauty Parlours
The applicant should take enough time to understand the eligibility criteria listed out for the various schemes available in the market. These SME loan products are designed for specific needs.
- General age eligibility is between 18-60 years
- Current experience in the business – Longer you have been in the business, better are your prospects of obtaining the loan
- Your credit history – having a healthy credit history is an underlining factor for your loan eligibility
- Revenue generation – a substantial revenue generation acknowledgement assures the lender of your repayment capability
Shopping for the suitable loan product
As mentioned earlier, there are numerous financing options available in the market. A solid groundwork is necessary to narrow down the ones suitable for your needs. Determining whether one needs a long-term loan, or a short-term loan, a working capital loan or a simple line of credit is very important.
Next step is to personally visit the banks or the financial institutions to gather information on the loan terms, eligibility criteria, documentation process, etc. This clears all the doubts regarding the loan.Documentation plays a vital role in business loan applications. Your business proposal is the lead document while presenting your application to the bank. It has to be easily comprehensible, stating all vital information required by the bank.
Include details pertaining to your experience in the business and mention any achievements or milestones to boost your case. Give details of any existing relationship with the bank. If you have any previous loans and have a good repayment history, it is worth mentioning. Elucidate your monetary contribution towards the business. It shows your commitment level towards the enterprise. Stack up all the necessary documentation, fill up the application and submit it to the bank.
Here are a few pointers to start you up with a business loan:
Quantum of Loan :
Beauty parlour is considered as a small & medium scale business. For this kind of businesses, loan amounts range from Rs. 25,000 up to Rs. 1 crore. But the applicant should carefully measure all parameters before deciding the loan amount he/she wants to apply for.
Guarantee/Collateral :
Business loans do require some kind of guarantee or collateral. Usually the machinery or equipment purchased, using the loan, is hypothecated to the bank as collateral or security. Producing additional guarantee or security increases your chance of loan procurement. Loans of Rs.1 crore or less obtained under the CGTSME scheme, by the Govt. of India, are given collateral free.
Rate of Interest :
Business loans are considered as general term loans and the rate of interest is based on the MCLR rate. The current interest rate for SME units ranges from 10% to 14%. However, women applicants are given concessions ranging from 0.25% - 0.50% on the interest rates.
Loan margin :
For loans up to Rs.25,000, the margin is usually NIL. For loans above Rs. 25,000 up to Rs. 2 lacs, a margin of 15% is observed and for loans above Rs.2 lac up to Rs. 10 lacs, a margin of 25% is observed.
Repayment Tenures :
Business loans usually come with a repayment tenure of 5-7 years. However, they are given a period of moratorium ranging from 1-3 years.
Credit history :
A healthy credit history ensures a smooth loan process. Lenders look out for candidates with a high credit score, which in turn assures them of your repayment capability. Your credit history is determined from previous loans with the current bank or a different bank, credit card payment history or any other type of credit facility and its repayment. Make sure that you have a clean record with regards to these aspects before applying for the loan.Revenue endorsements :
Give the history of the revenue generated in the business to assure the lender of the business viability. If it is a new set up, provide the details of the profitability of the venture to impress upon the banker.
Schemes offering loans for beauty parlours
As mentioned earlier, there are numerous loan products on offer to help entrepreneurs to start their beauty parlour or salon business. A few banks offer exclusive beauty parlour loans
- Bharathiya Mahila Bank – Shringaar
- Orient Mahila Vikas Yojana Scheme
- MUDRA Yojana Scheme for Women
- Shishu: covering loans up to Rs. 50,000/-
- Kishor: covering loans of Rs. 50,000/- up to Rs. 5 lacs
- Tarun: covering loans of Rs. 5 lacs up to Rs. 10 lacs
This loan is specially designed for women planning to establish their own Beauty Parlour. This loan was devised in partnership with leading Salon brands like Naturals, CavinKare & Lakme Ltd. This loan is provided either as a Term Loan or a Working Capital Loan. The loan can be used for purchase/construction of the parlour premises and purchase of tools and equipment. Under the CGTMSE loan facility of the Government of India, this loan does not require any collateral for loans up to Rs. 1 crore. The current rate of interest being offered is between 10.15% - 13.65%. A concession of 0.25% on the interest rate is offered to women applicants. The repayment tenure is 7 years for Shringaar loans.
This scheme is initiated by Oriental Bank of Commerce. It helps women with the initial capital to set up a small business. The applicant should hold 51% ownership of the business for which the loan is applied for. A loan amount of Rs.10 lac can be availed without any security or collateral. The maximum repayment tenure is 7 years. A concession of 2% is offered on the interest rate.
The Pradhan Mantri Mudra Yojana (PMMY) has developed various schemes and products aimed at supporting the development and funding needs of micro unit/entrepreneur beneficiaries. It has 3 segments signifying the stage of growth/development and the funding needs of the units –
Women entrepreneurs can avail loans for their business under these schemes. Under the MUDRA scheme, women business owners can get a concession on the interest rates.
The above schemes are specially designed for women applicants. Other applicants can avail a loan through various other Small & Medium Business financing options.
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