5 Popular Financing Solutions for Expanding Your Spa

The wellness world is surely booming, and spas are no longer just a luxury, they’re part of people’s everyday self-care routine. For spa owners in the U.S., that means demand is rising, expectations are higher, and competition is everywhere. Therefore, staying ahead isn’t just about offering great services, it’s about evolving your space, team, and your equipment.

However, growing your spa business doesn’t come cheap. Whether you’re planning to add a swim spa, upgrade to a new hot tub, or launch a second location, expansion takes capital. And, spa financing options can help you with all these upgrades and expansions.

In this article, we’ll go through the five popular spa financing options for business owners. We’ll also discuss what lenders look for and how to choose the right business loan for spas.

Do Spa Businesses Need Financing and Why

Imagine steam rolls off freshly cleaned tiles. Soft music plays in the background. A client sinks into a warm hydrotherapy tub and exhales stress they didn’t even know they were carrying. This isn’t just self-care, it’s a lifestyle shift.

According to the Global Wellness Institute, the global wellness economy hit a new peak of $6.3 trillion in 2023. Across the U.S., more people are prioritizing their well-being like never before. They’re trading quick fixes for long-term wellness routines. And spas are at the center of this transformation.

From swim spas and saunas to advanced skin treatments, clients expect more than just a massage, they want an experience. Hence, spa owners are feeling the pressure to expand, upgrade, and innovate. Whether that means investing in a new hot tub, hiring specialists, or remodeling outdated interiors, the demand is clear.

However, meeting the demand isn’t that easy, especially when the costs are rising. Here are some of the common reasons for considering spa financing options:

• Upgrading or buying new equipment: Spa business owners can use funds to upgrade or buy equipment including swim spas, saunas, or hydrotherapy systems which often come with a warranty but involve a significant upfront cost.
• Opening new locations: Business loans for spas can help open new locations or renovate existing ones that demand capital for rent, renovations, and staff.
• Covering cash flow gaps: Spa financing offers funds to cover operational costs or day-to-day expenses during seasonal changes or slow months.
• Marketing and promotions: To enhance brand visibility and attract more clients, business owners can use spa small business loans.

Additionally, established spas may need spa financing programs to maintain growth and invest in high-quality offerings. Many business owners require additional funds to keep up with client expectations and the health benefits that modern spa-goers expect.

Therefore, with the right spa financing option, it’s easy to cover these costs while maintaining smooth operations.

5 Popular Spa Financing Options

To choose the right financial plan for your spa business means balancing your financial situation, your spa’s goals, and your repayment ability. Here are the five most popular and effective spa financing options for your business:

SBA Loans

SBA loans are one of the most popular financing programs available for small business owners and are backed by the U.S. Small Business Administration. These business loans often come with lower interest rates and longer repayment loan terms for qualified applicants. SBA loans are partially guaranteed by the federal government and are issued by private lenders such as banks and credit unions.

Spa business owners can use SBA loans to renovate their existing space, buy new equipment such as hot tub purchases, or meet day-to-day operational expenses. This spa financing option can also be used to upgrade to a new swimming pool or hot tub. However, the application process for SBA loans is a bit stringent and requires a good credit score.

Equipment Financing

Equipment financing is a funding solution designed specifically for purchasing or leasing business equipment. Instead of paying the upfront cost, borrowers can pay in easy monthly payments. Here, the equipment itself serves as collateral, reducing the risk for the lenders.

Spa owners can use equipment financing to purchase hydrotherapy tubs, hot tubs, or spa treatment machines. For example, financing a hot tub from your local dealer with equipment financing or a payment plan can help you add value to your spa. Moreover, many hot tub dealers offer various spa financing options including hot tub financing options and hot tub loan programs with warranties.

Business Line of Credit

A business line of credit is a flexible financing option that offers quick access to funds when needed up to a pre-approved limit. Borrowers can easily draw funds when they need, while paying interest only on the amount used.

Spa businesses can use a line of credit option to cover short-term expenses like staffing or seasonal marketing. Additionally, this spa financing option can be used to launch a holiday campaign for marketing or invest in new saunas.

Term Loans

Term loans are also one of the best financing options available for small businesses. They offer a lump sum loan amount that can be repaid over a set period of time. These loans often come with competitive rates and a fixed repayment structure, making it easy for borrowers to repay in monthly payments.

Spa owners can use term loans for large one-time investments like opening a new location or a major hot tub purchase. Additionally, this spa financing option is ideal for expanding services, purchasing equipment, remodeling, launching a new brand, or investing in marketing strategies.

Merchant Cash Advance (MCA)

A merchant cash advance is a type of financing solution and not a loan. This fast funding option offers a lump sum of cash in exchange for a portion of your future credit card sales. Here repayments are deducted automatically from daily sales.

Spa businesses can use MCA as a spa financing option to cover unexpected expenses or urgent repairs. When traditional loans fall short, MCA can offer quick access to funds with minimal paperwork. However, MCA comes with higher interest rates and might be well suited for spas with steady credit card sales.

What Lenders Look For

When applying for different spa financing options, being prepared beforehand often improves your chances of approval.

Here’s what lenders evaluate when seeking business loans for spas.

• Credit score: Having a good credit score of 670 or above improves your chances of securing lower interest rates.
• Business plan: Make sure a draft a detailed business plan as lenders want to know how funds will support growth and repayment.
• Time in business: Lenders typically prefer business owners who have been in business for at least 12-24 months.
• Revenue and cash flow: Gather all your financial statements, tax returns, and other important documents as this indicates your ability to make monthly payments.
• Collateral: Some spa financing options might require assets like equipment or property.

How to Choose the Right Spa Financing Option

When deciding among the right spa financing option, consider your:

• Financial situation: This includes your creditworthiness and cash flow.
• Purpose of funds: Whether you need funds for equipment purchase, renovation, or working capital.
• Urgency: How quickly you need funds.
• Repayment comfort: How much you can afford in monthly payments.

If your credit score is less than ideal or you have bad credit, you can go for other hassle-free financing options like personal loans or loans from alternative lenders. However, these options come with their own risks and terms.

The Bottom Line

Expanding your spa business demands smart decisions about spa financing. Whether you opt for an SBA loan, equipment financing, or flexible lines of credit, each financing plan can help you provide more value and better well-being services to your clients.

Good spa small business loans offer you the ability to invest in new technology, hot tubs, or saunas that improve customer experiences. With the right loan term and manageable monthly payments, you can avoid the financial hassle and focus on what matters, this is growing your spa.

FAQs About Spa Financing for Your Business

What are the ideal financing options for expanding my spa?

Choosing the right spa financing options depends on your financial goals, credit profile, and how quickly you need the funds. Some spa owners prefer SBA loans for their lower interest rates, while others lean toward lines of credit or equipment financing for flexibility. Hence, always compare a few offers based on your priorities before making a decision.

Can I still get spa financing with bad credit?

It’s possible, though it might be more challenging. Some lenders offer spa small business loans to owners with less-than-perfect credit, especially if there’s consistent revenue or valuable collateral involved. Options like merchant cash advances or equipment leases may also be available, though they often come with higher interest rates.

What do lenders typically look for in a spa loan application?

While each lender is different, most will review your credit score, revenue history, time in business, and sometimes collateral. Some may also consider the purpose of the loan and how it aligns with your business plan. Therefore, having strong financials and organized documents can make the process smoother.

Can I apply for multiple financing options at once?

It’s possible, but applying for several loans at once could temporarily affect your credit score, especially if they involve hard inquiries. However, some business owners do explore multiple offers to compare monthly payments, loan terms, or rates before selecting the right financing plan. A soft pre-approval check, when available, might help you gauge your options without impact.

How do I know if my spa is ready to take on financing?

That depends on your current cash flow, upcoming goals, and long-term outlook. If you're consistently generating revenue and see a clear return on investment from expanding, then taking on a business loan for spa upgrades could make sense. However, it’s worth discussing with a financial advisor to determine if now is the right time based on your full financial situation.

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