Nailpro Essentials 2011 - (Page 58)
Money Q & A
Learn how to best prepare for a business loan meeting with tips from financial guru Suze Orman.
hen faced with how to effectively approach a bank about a loan, we went to a top expert in the field for advice. Contributing editor Liz Barrett spoke with Suze Orman (suzeorman.com), an internationally acclaimed personal finance expert, who was more than happy to lend her advice about the current financial outlook for nail technicians and how to best prepare for that all-important meeting with your loan officer.
What’s the biggest mistake most nail technicians make when trying to secure a loan? The biggest mistake most people make is being ill prepared to apply for a loan because they don’t even know what it means. Most people attempt to get a loan without having any idea if they even qualify for one. How does a tech know if she qualifies for a loan? Know your credit score. If it’s not 720 or above, don’t even bother applying. Don’t set yourself up for failure or rejection before you even walk through the door. Many don’t know their credit score; they don’t have a profit and loss statement or a business plan; and they think simply because they want to open up a nail salon that all they have to do is go in and say, ‘I need this much money,’ without actually presenting to the bank why they need that much money, how they’re going to spend the money, and what type of income they’ll need to have to be able to pay back the money. How quickly can someone raise a credit score that’s less than 720? It depends on how far below you are. It could take a few months or a few years. There’s no fast way to bring up the score. Just continue to pay your bills on time and continue to pay off your debts. Don’t use your credit cards for at least two months before applying for a score and then you’ll get a true picture of it. Especially if you’re going to apply for a loan, don’t use those credit cards for at least two months.
What’s the best way to determine the amount you need to borrow? A profit and loss statement, month by month, will help you determine exactly how much money you currently have and how much money you need to borrow. What goes into that statement? Figure for a good year that you’re going to have extra expenses, such as advertising. And you have to plan for the possibility that no one will walk through your door for six months. You have to have the money to carry you. So, do a realistic projection. If you’re going to rent a place, it’s not just renting a place. How much is your electricity, insurance, water, garbage, laundry, etc.? How many employees will you be paying? All of this needs to be accurate. Are there alternatives to banks for nail technicians? Obviously the Small Business Association (SBA), but it depends on, really, how much money you need. I mean, the best loan of all, if you could do it, would be to put everything on a credit card and see if you could finance it that way. It just depends on how much you need and your situation. If you’re not credit worthy, then what are you going to do? Can you get a personal loan from someone? Maybe people who’ve been your clients for the past 10 years will each pitch in $1,000 for you to open your own business. You never know what people will do. You have to be resourceful.
What are your top three preparation tips when applying for a business loan? Know your own situation. Determine what your expenses are going to be. How much is it going to cost you to buy the equipment, buy the inventory, pay for help or pay for health insurance if you have to? What are the absolute costs of running this business? How much are you going to put into this yourself? Where is your money going to come from? After planning for income and customers, you have to plan for the possibility that if you thought 10 people would come in each day to get their nails done and only two people show up, how will you get more people to come in? Present an accurate picture, with worst-case scenarios of what it’s going to cost to run this business and how you plan to pay the loan back. When you’re doing all this, don’t count yourself out of the equation. Too many women only figure out what they’re going to pay their employees and forget to pay themselves.
Do nail technicians have a better chance of getting a loan than, say, a restaurant owner? Yes! The overhead to run a nail salon is far less than what’s needed to run a restaurant. You don’t have the food spoilage or liability concerns involved with a restaurant either. If you put old nail polish on somebody, it might chip off faster, but they’re not going to walk home with nail poisoning. You can open up a nail salon with very little money.
2 0 11
Table of Contents for the Digital Edition of Nailpro Essentials 2011
Nailpro Essentials 2011
Table of Contents
Owner vs. Tech
One Look Three Ways
What I Love About My Job
Bank Loans: 101
Nailpro Essentials 2011