How to Open a Salon and Secure Financing for It

Owning a salon business is a rewarding dream for many people. Not only does it require talent and experience, but it is also a perfect blend of your style and customer service. A successful salon demands careful planning, securing proper financing, selecting the ideal location, and managing costs smartly.

You need funds to rent the space, salon equipment, staff salaries, and marketing, among other expenses. For all these costs, one of the best financing options is to get a business loan for a salon. Securing a loan nowadays has become easy with minimal paperwork and an online process.

Starting a salon demands planning what services you will offer, securing an accessible location, completing necessary registrations, and more. Here are some detailed steps on how to make your dream of opening a salon come true:

1. Research and Create a Business Plan

Start with research and find out the customer needs, trends, geographic analysis, target market, management strategies, sample services, etc. Your planning must also include potential renting spaces, company description, and financial planning.

2. Plan Your Offerings

Determine the services you will offer in your salon. Here are some common services that salons in India offer:

• Haircuts and styling

• Hair colouring and highlights

• Manicures and pedicures

• Waxing and threading

• Hair treatments

• Facials and skincare treatments

Consider the Average Price per Customer (APC) and also look at the trending theme and services. While planning, also keep future development and expansion in mind. 

3. Select the Right Location

A location accessible to potential customers is important so that your customers can travel to get your services easily. Also, selecting the right location determines business success, done through competitor analysis. 

The location or space you are looking for must be visible, accessible, and have transport facilities. For instance, shops on higher building floors are less visible compared to shops on lower ground. 

4. Evaluate Various Costs 

After selecting the ideal location for your salon, it is essential to assess all associated costs. A salon business typically involves significant investment in mechanical and electrical equipment, along with the following expenses:

• Rent for the space

• Licences and permits

• Salaries for staff and service providers

• Marketing, advertising, and promotions

• Salon interiors, including furniture and decor

• Costs for products and supplies like hair colour or skincare products

Be sure to factor in these costs to maintain profitability while offering quality services.

5. Get Finances Ready

After your business has the right foundation and plan, you will need funds to start setting up your business at the place. To do so, you either can invest through self-funding or secure a loan for opening a salon. Getting a loan has become easy with competitive interest rates, substantial loan amounts, and flexible tenures. 

6. Rent a space and order Equipment 

Once funding is secured, it is time to rent a suitable space and invest in essential equipment and machinery. This includes upgrading the salon interior and purchasing products needed for services. 

Having already assessed costs, ensure you have enough capital set aside for initial expenses, such as the first month’s rent and product restocks. This capital will help cover costs until the business starts generating consistent profits.

7. Complete Required Registration and Licences

If you are wondering how to open a salon legally, you will need to register your business under the government and get licences to operate. Without these licences, your operations can be impacted. You can get all required licences by applying to the nearby local government bodies. Some licences include:

• Trade Licence

• Goods And Services Tax (GST) Registration

• Business Registration

8. Hire Skilled Staff

After you have got the permits and legal licensing to operate your salon, the next step is to hire a skilled staff. All the people you hire will help in managing your business administration, operations, marketing, and customer service. These can include:

• Hair stylists

• Makeup artists

• Housekeeping staff

• Store manager

• Receptionist

9. Marketing Plan

After your business is ready for final operations, the final step is to spread the word about your business. Marketing and promotion plans help to drive awareness about your business and the services you offer. Use methods like digital advertising and social media to drive customers.

You will have to register your business to get a trade licence and complete other legal formalities for seamless operations. Here is a list of all relevant licences and registrations to get your salon operating:

• Business Registration

You will have to register your business as a partnership firm, private limited company, limited liability company, or sole proprietorship. You can do this at the sub-registrar’s office as the registrar will help in completing all these formalities. 

• Registering Under the Shops and Establishment Act

After your business is set up, you will have to register it under the Shops and Establishment Act of the Government of India. This registration has to be completed within 30 days of business setup. This ensures that you are following business rules such as work timings, closing times, leave policies, notice display rules, etc.  

• Registration for PAN and TAN

In case you have registered your business as a sole proprietorship, you must register for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). They are issued by the Income Tax Department (ICT) and are required for TDS deductions. 

• GST Registration

In case your business exceeds the annual revenue of ₹10 Lakhs, you will need to register for GST. This is necessary for tax deductions applicable to your business.

• Trade Licence

Before starting a salon business, you need to get a trade licence. You can obtain this from the local administration that verifies your business as legal. 

• Professional Tax Registration

This is made applicable to businesses by the Municipal Authority and varies according to the state. For professional tax registration, check the requirements set by your state government and adhere to them. 

• Fire No Objection Certificate (NOC)

You need to get a fire NOC from the Chief Fire Officer. Some documents to get this NOC will include building design, certificate from the architect, building model, electrical appliances list, etc. 

• Pollution Control Board (PCB) Certificate

As your salon business will account for some waste, such as hair and nails, you will have to get a certificate from PCB. An officer from PCB will evaluate your facility after the successful submission of documents. 

• Employment Registration

If you hire more than 20 people on a payment basis for our business, you will have to register for ESIC Online Registration (ESIC). This scheme provides benefits to all employees getting wages less than ₹21,000 per month.

Opening a salon in India involves various costs that depend on factors such as city tier, salon size, services offered, and whether you opt for an independent setup or a franchise model. 

Here is a comprehensive cost breakdown to guide your planning:

Disclaimer: The cost estimates mentioned above are based on general industry averages and may vary depending on the specific location, size, and nature of your salon. Actual costs may differ, so it is advisable to conduct a detailed market survey and consult with local experts before finalising your budget.

Cost Breakdown by Category

• Rent and Location

Rent costs can vary widely based on city tier, location (mall, street, or commercial building), and the size of your salon. In Tier-1 cities, rent can be the highest expense.

• Salon Equipment and Furniture

Setting up the salon with essential furniture such as styling chairs, mirrors, shampoo stations, and dryers can cost ₹1–2 Lakhs.

• Salon Licenses and Permits

Obtaining the necessary licenses and permits from local authorities may cost between ₹10,000–₹30,000, depending on the regulations in each region.

• Inventory (Products)

Initial inventory of products (shampoo, conditioner, hair colour, etc.) will range from ₹50,000 to ₹1 Lakh based on your salon size and product range.

• Marketing and Branding

Expenses for advertising, website creation, and branding typically range from ₹30,000 to ₹1 Lakh, depending on the scale of your campaign.

To start your salon and keep it running smoothly, you need adequate funds. Get funds from your personal savings, apply for a business loan, or explore government schemes designed to support new businesses. Business loans typically offer lower interest rates and flexible repayment terms, making them an attractive option.

Uses of a Business Loan for Salon

• Initial Rent: Until your business starts making a profit, you will need to cover rent for your salon space. It is important to reserve funds to pay for the rent during the initial months.

• Renovation and Expansion: Once you have secured a suitable location, you will need funds for renovations and interior design to create a welcoming environment. In addition to the initial setup, it is wise to set aside some funds for future growth, ensuring you are prepared for any expansion needs as your business thrives.

• Purchasing Equipment: A significant portion of your initial salon startup costs will go towards buying essential equipment and machines. Since your salon will require a variety of tools for hair, nails, and beauty services, it is important to allocate part of your loan for these purchases.

• Marketing and Promotional Activities: You will also require funds for marketing and promotional advertisements. It will bring your potential customers to your business and make it more profitable.

• Training Staff: After hiring experienced staff, you will need to allocate part of your capital for their training. Additionally, you will need funds to cover their salaries until your business begins generating profit.

• Technology: Integrating technology for payment systems and administrative tasks will be essential to streamline your operations. Allocating some funds for these technological upgrades will ensure your business stays current and efficient.

Benefits of a Business Loan

Some benefits of a business loan include flexible loan amount and repayment tenure. Here are the key benefits in detail:

• Fast Loan Disbursal: Many lenders provide quick loan disbursal as soon as the application is approved, allowing you to start the business without delays.

• Competitive Interest Rates: Since there are a plethora of lenders, you are free to choose a business loan with a competitive interest rate by comparing offers from various lenders.

• Minimal Documentation: Many lenders require minimal documentation and an online application process. You only need to add a digital copy of your documents to complete the process.

• Flexible Tenure: Based on your financial situation, choose a short or extended repayment tenure. A longer tenure helps split the cost into smaller, more affordable monthly instalments.

• No Need for Collateral: Business loans are usually unsecured, meaning you do not need to pledge collateral to the lender. The approval is based on your income or repayment history.

Get a business loan through Bajaj Markets after comparing various lenders and getting the best loan terms. Check out some available business loans through this platform and their interest rates:

Disclaimer: The mentioned rates are subject to change at the lender’s discretion.

To apply for a business loan via Bajaj Markets, you must adhere to the age, income, and other requirements. Check the eligibility criteria you need to meet to qualify below: 

• Resident: You must be an Indian resident

• CIBIL Score: You must have a high score to prove your creditworthiness

• Age: Your age must be between 21 and 60 years

• Employment: You can either be a self-employed professional or non-professional 

• Business Vintage: Your business must be operational for at least 1 year

• Business Structure: Your business must be registered as a partnership, limited liability partnership, or private limited company

• Business Turnover: Your business must have a minimum annual turnover of ₹1.5 Lakhs as per ITR

After you ensure that you fit in the eligibility needs, you must have some documents handy to apply for a business loan. These documents include:

• Identity Proof: Aadhaar card, PAN card, Voter’s ID, driving licence, passport

• Address Proof: Aadhaar card, utility bills, lease agreement, passport

• Business Proof: Copy of Partnership Deed, Certified copy of Memorandum, Sole Proprietorship Declaration, and Articles of Association

• Income Proof: Last 6 months’ bank statement, income computation, Profit and Loss (P&L) statement, last 2 years balance sheet, ITR in addition to certified copies with details

When applying for a salon business loan, the criteria differ depending on whether you're applying as an individual or a business. Individuals will need to provide a CIBIL score, while businesses must submit a Company Credit Report (CCR) rating.

Here’s how:

For Individuals (Sole Proprietors/Freelancers)

If you are applying as an individual, your CIBIL score will be assessed. The CIBIL score ranges from 300 to 900, and a score of 750 or above is typically needed to qualify for business loans with favourable conditions.

For Companies (Registered Business Entities)

If you are applying as a registered business entity (such as an LLP, Pvt Ltd, or partnership), you will need to submit your Company Credit Report (CCR). The CCR rating ranges from 1 to 10, and a CCR rating of 1-3 is considered optimal for securing a business loan. A solid CCR rating reflects your salon's financial stability and enhances your chances of obtaining funding for expansion or new setups.

To apply for a business loan through this platform, follow these steps:

• Visit the official website of Bajaj Markets
  

• Go to the 'Business Loan' page located in the 'Loans' section
  

• Click on 'Check Offers' in the top-right corner
  

• Complete the application form with your personal and income details
  

• Click on ‘Check Your Offer’ to proceed and continue

The Indian government offers several schemes to help Small and Medium Enterprises (SMEs) and Micro, Small, and Medium Enterprises (MSMEs) access loans, including salon businesses. These schemes, available both at the central and state levels, provide affordable financing options for setting up or expanding businesses. 

Here’s a table with details of these schemes:

Disclaimer: The loan amounts and scheme details provided above are indicative and may vary based on eligibility criteria, location, and specific government policies.