Jessica Frost If you’re heading into the exciting world of spas and beauty clinic ownership, you’ll likely already know that it requires a lot of assets to start up – as well as training, health and safety equipment, inventory, and much more. With ongoing lockdowns and stress levels rising, a bit of pampering and relaxation is in demand more than ever.
However, if you are looking to invest in a spa or clinic business, you need to get finance the right way. With interest rates at record lows and government incentives spurring on recovery from lockdowns on the way, here is your comprehensive guide to financing a spa or clinic business while avoiding the pitfalls.
Business Finance – Chattel Mortgages
The first choice for business finance is considering a chattel mortgage as it has many tax write-offs and incentives built into its structure.
A chattel mortgage is a type of secured loan, which ties the loan amount to the assets you purchase. However, they also allow for your business to finance 100% of the value of the equipment. This way you can pay off insurance, training, or other establishment costs such as installation over time.
Chattel mortgages usually have more competitive interest rates than similar, unsecured loans. Managing Director of Savvy and business finance expert Bill Tsouvalas says chattel mortgages are the best choice. “What’s great about these kinds of loans is that you can also claim interest paid, GST paid, and depreciation back on your activity statements. In some circumstances, you can add balloon payments and extend or shrink your loan term down to suit your needs.”
Look For Business Support
The New South Wales government offers a “business concierge” as part of its Business Connect support program. They provide advisors and written guides to help you on your way to establishing a viable, thriving business. Consultations with these advisors are free – and they’ve already proven themselves in the beauty or spa sector. You can find out more at the NSW Business portal.
The SME Recovery Loan scheme
Since the end of the JobKeeper subsidy at the beginning of this year, the Federal Government is still offering support to businesses in the form of a loan guarantee. As we’ve mentioned before, the Recovery Loan scheme boosts lenders’ capability to provide competitive credit products to eligible businesses. The government guarantees or covers 80% of the loan amount, with banks and lenders covering the remaining 20%.
“What’s even better is that the government has mandated a cap of 7.5%p.a. on all recovery loans and extended repayment holidays for up to 24 months. The loans can also be spread over 10-year terms,” Tsouvalas says.
SMEs with a turnover of up to $250 million that also received JobKeeper are eligible, as well as people effected by the March 2021 floods.
Businesses can borrow up to $5 million, including refinancing outstanding debts from other borrowers, though conditions apply. It can’t be used to buy residential property, financial products such as stocks, or lease or rent assets halfway through their depreciation cycle.
“It’s another lifeline for businesses in the beauty sector who have done it extremely tough due to being the first ones hit with COVIDSafe plans and general worry about transmission. We all know we were safe before and we’re even safer now in this industry, having the most rigorous standards. Let’s hope these measures can get things back on track.”
The scheme is open until 30 June 2021 from participating banks or lenders.