Medical Spa Financing Options: Tips to Fund Your MedSpa Business

The medical spa (MedSpa) industry is at the intersection of healthcare, wellness, and cosmetics. MedSpa services offer things like injectables and fillers like Botox, laser treatments, and advanced skincare therapies to make people feel pampered and invest in their self-care. While the MedSpa industry is growing, creating more opportunities for entrepreneurs, starting such a business requires a substantial upfront investment, usually driven by the high cost of medical-grade equipment and specialized real estate build-outs. Finding the right medical spa financing option is critical for anyone who’s wondering how to fund a medical spa.

Choosing the best funding path depends on several factors, including your business’s current stage, credit profile, and immediate capital needs. Here, we’ll delve into the med spa financing options available to help you find the right lending partners and financing solutions for your business goals.

In this article:

• Exploring the top medical spa financing options available.
• Understanding eligibility requirements for medspa loans and how to find flexible financing to support different business needs.
• Tips for how to choose the right medical spa business loan for you.

1. Traditional Term Loans

Traditional financial institutions like banks and credit unions offer term loans that can support medical spas. Term loans provide you with an upfront, lump sum of money that you can use to address a wide variety of business needs. You could use the proceeds to acquire a new office space, invest in new med spa treatments, like laser hair removal or microneedling, and even leverage the funds to offer services like payment plans to your customers.

However, while these may be medical spa financing options with some of the lowest costs and longest repayment terms, they tend to have slow funding times and lack flexible payment options, which can be beneficial for new businesses. The strict eligibility requirements and hard credit check may be a hassle for new spa services, and some business owners may not even be able to prequalify if they have poor credit or little business history of delivering cosmetic treatments.

2. SBA Loans

The U.S. Small Business Administration doesn’t lend money directly, but it works with lenders to guarantee a percentage of loans issued by partners. This guarantee significantly reduces the risk for the lender.

SBA loans tend to have some of the most competitive interest rates on the market and long repayment terms that can lower monthly payments and improve your business’s cash flow. The most popular program, the SBA 7(a) loan program, allows you to use funds for nearly any legitimate business purpose, from buying an existing practice to medical spa treatment plan improvements, like facials, coolsculpting, chemical peels, and more.

The downside of SBA loans, however, is that the application and underwriting process is notoriously slow. It can take months to receive funds, making them one of the slowest medical spa financing options. They’re also subject to strict eligibility requirements and may require collateral to secure a medical spa business loan.

3. Equipment Financing

Aesthetic treatments require a lot of high-end medical equipment. For a med spa, one of the largest capital expenditures tends to be the machinery. Therefore, one of the best medical spa financing options may be equipment financing.

An equipment loan is a term loan tied to a piece of equipment. The equipment itself serves as the primary collateral, which the lender can seize if you fail to repay the loan. Equipment loans tend to have less strict eligibility requirements and can process faster than a term loan. By financing equipment, you can save your cash reserves (minus a down payment) for operational expenses and have predictable monthly payments you can build into your budget.

Repayment terms on equipment loans typically match the useful life of the equipment and must be paid in installments. Some states may not allow prepayment penalties, so it’s possible you could purchase the equipment outright before paying the full cost of the loan.

4. Business Lines of Credit

A business line of credit is one of the most flexible medical spa financing options. It works partly like a small business loan and partly like a business credit card. You’re approved for a maximum loan amount that you can withdraw against, only paying interest on what you use. Most lines of credit are revolving, meaning that once you repay what you borrowed, you can draw upon the funds again up to the full limit.

Lines of credit are very flexible, allowing you to cover treatment costs, inventory management (like dermal fillers), and other working capital needs without limiting your cash flow. Once it’s set up, you can access the funds very quickly.

The downsides to lines of credit are that they typically have lower limits than some other medical spa financing options, like term loans, and that rates are often variable, meaning they can increase with little notice. That may feel like you’re paying hidden fees despite the variable rate being built into the cost.

5. Alternative Funding Solutions

Med spa owners or aspiring owners how need fast capital, have lower credit scores, or can’t qualify for traditional bank loans might consider alternative lenders. Today’s lending landscape is filled with online platforms and specialized non-bank lenders that can provide accessible medical spa financing options.

Online lenders tend to offer much faster funding times than traditional ones and are more willing to work with startups or businesses with lower credit scores. They also frequently offer streamlined application processes. The cost is that they tend to have higher interest rates and shorter repayment terms.

Some of the alternative funding options available to you may include:

• Real estate loans: If you’re acquiring a property or renovating a space for plastic surgery, dermatology, weight loss treatment, or another specific purpose, online lenders may offer construction or commercial real estate loans to help you finance the necessary changes.
• Merchant cash advances (MCAs): A merchant cash advance is not a loan. Rather, it’s a commercial agreement with a third-party financier that pays your business an upfront sum in exchange for a percentage of future credit card and debit card sales. MCAs are often more expensive than traditional loans and have frequent repayment schedules that can put your business in a cash crunch, but they offer fast funding, high approval rates, and repayment requirements that are dependent on your revenue. So, if business is slow, you don’t pay as much, making them a more flexible (albeir costly) medical spa financing option.

How to Choose the Best Medical Spa Financing Option

The right choice of medical spa financing options is strategic, and it may not boil down to a single option. To determine the right option, consider your needs:

• For major assets: If you have good credit and time, an SBA loan can be a good option to purchase real estate and equipment. If you’re short on time and only need equipment rather than real estate, an equipment loan may be your best bet.
• For working capital: A business line of credit is the most flexible and cost-effective option for operational costs like inventory, payroll, and marketing.
• For urgency: If you have urgent financing needs or you can’t qualify for traditional financing, a term loan from an online lender may be your best medical spa financing option.

Final Thoughts

Ultimately, the right medical spa financing option depends on both your immediate and projected future needs. For instance, leveraging a long-term SBA loan can help you cover an array of startup costs, while equipment loans can address specialized equipment needs. A line of credit may serve as a safety net for financial emergencies or slow periods. Building a sustainable foundation for your medical spa business requires aligning your financial needs with the right funding structure so you can continue to capitalize on a growing market.

FAQs About Medical Spa Financing Options

1. What is the biggest expense that drives the need for medical spa financing?

There are several major expenses for new medical spas that may demand medspa loans. Some of the most important to consider are labor, machinery, and insurance.

2. Can I use an SBA loan to buy an existing MedSpa business?

Yes, SBA 7(a) loans are frequently used for business acquisition. You can use the loan proceeds to purchase an existing practice’s assets, branding, and potentially even pay off any debt that the business still has. SBA loans can be a very comprehensive medical spa financing option.

3. Should I choose leasing or buying for my MedSpa equipment?

The choice depends on your long-term strategy. Buying is often better if you feel it’s important to own the equipment and expect it to last a long time, since it will have a lower overall long-term cost. Leasing is better if you prioritize low upfront cost and the ability to frequently upgrade to the latest technology.

4. How long does it take to get approved for MedSpa financing?

Approval times vary significantly between lenders and loan types. Traditional banks and SBA lenders may take weeks or even months to approve and fund a loan. Online lenders may be able to process and fund a loan quicker.. Usually, the faster the loan, the higher the interest rate or fees.

5. What are the major criteria lenders evaluate when offering medical spa financing options?

The main eligibility requirements for most lenders are credit score, time in business, and annual revenue. Lenders will evaluate your personal and business credit scores, financial statements that show cash flow and annual financial performance, and your professional experience and business plan to determine your qualifications for succeeding in the med spa business.

Frequent searches leading to this page