Updated: Dec 9, 2019
Barbershops have moved beyond just a shave and a haircut these days, taking the business of men’s grooming to a whole new level. Running a successful barbershop requires more than just a knack for styling–it also takes capital to keep the momentum going. When you need financing, a term loan may be the best solution. This quick guide explains:
Term loans aren’t overly complicated. It works like this: the bank lends you a specific amount of money and you agree to repay it over a set period of time. The loan may have a fixed or variable interest rate but your principal payment is always the same.
Short-term loans typically have repayment periods lasting between three and 18 months. A long-term loan, on the other hand, could stretch the payments out over five to 10 years. Generally, the longer the repayment term, the more you’re able to borrow.
Some lenders offer intermediate term loans, which fall in the middle in terms of repayment. Funding Circle’s intermediate term loans feature repayment terms of one to three years, with payments made on a biweekly or monthly basis. You can borrow up to $1 million, with rates starting as low as six percent.
Why choose a term loan?
A term loan from an online lender offers certain advantages over other types of financing. For instance, term loans tend to have more favorable interest rates than something like a merchant cash advance or a small business credit card. That’s important if you need financing for your barbershop but you don’t want to pay an unnecessarily high amount of interest.
The other advantage is speed. When you apply for a loan through a bank, it can take weeks for it to be processed and funded. A Small Business Administration (SBA) loan can take even longer. With a term loan, the process is much faster and more efficient. Funding Circle, for example, can process term loan applications in as little as 48 hours.
Term loans can prove valuable to barbershop owners in more ways than one. Here are some scenarios that illustrate the usefulness of a term loan:
The best way to look at a term loan is as an investment in your barbershop for the long haul. Sam Buffa, founder of New York City’s Fellow Barber, turned to a reputable online lender for a term loan after realizing that credit cards and loans from family weren’t enough to fuel the kind of growth he was after. To learn more about Sam’s story in his own words, check out the video below.
Before applying for a term loan for your barbershop, consider what lenders are looking for first. For example, Funding Circle works with borrowers who have:
When evaluating lenders, pay close attention to what’s needed to qualify. Besides that, carefully review the rates and fees to make sure your barbershop is getting the best lending terms.