Are you planning to open up a salon? Well, that’s great but do not forget to consider the following before starting the salon business.

Running a Beauty parlour/salon is one of the hottest trends in business today, as many women especially millennial are launching their own beauty parlour and salon. But starting a beauty parlour is not so easy at it looks because it requires certain legal and regulatory registrations that many not follow and run into troubles.

1. Registration of Business

2. PAN & TAN

3. Fire NOC

4. Registration under Shops and Establishments Act

5. GSTIN Registration

6. Professional Tax Registration

7. Trade License

8. Labour law Registrations

9. Pollution control board intimation for white category status

10. License for playing music or videos

1. Registration of business

The first step you will need to complete is finalizing a corporate structure for your beauty parlour/salon i.e., whether the business will be a Company, Partnership Firm/ Limited Liability Partnership (‘LLP’) or sole-proprietorship depending on the Capital size, ownership, management and expansion plans of the business. Based on the chosen business form, you must obtain a registration from the registrar of companies for a Company/ LLP or sub registrar’s office for a partnership firm. A sole proprietorship doesn’t require any registration in India to run as a business.

2. PAN & TAN

Every business including beauty parlours and salons will need a PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) in the name of the business, and in the case of a Sole Proprietorship, PAN/ TAN will be in the name of the owner of the business.PAN and TAN are two ten-digit unique alphanumeric numbers issued by the Income Tax Department. Every person who deducts or collects tax at source needs to apply for the allotment of TAN.

As per the recent changes, AADHAR can be used in place of PAN for filingIT Returns but PAN is stillessential when it comes to making payments exceeding Rs 50,000.

3. Fire NOC

A salon is also required to obtain an NOC from the Chief Fire Officer before commencing business. To obtain the same, it has to submit building plans, model of the building and certificate from the Architect, Electronic appliances used, and also fill out a questionnaire related to fire safety rules and regulations.

4. Registration under Shops and Establishments Act

The Shops and Establishment Act gives the list of norms for employing any person in the shop/ establishment such as opening and closing time, holidays, permissible working hours, overtime policy, rest intervals, paid leave, allocation of work, display of notices, etc.

Within 30 days of starting a business, obtain a license under Shops and Establishments Act from the particular State labour department, by submitting an application under FORM A along with the Legal ID, occupancy evidence, PAN, authority letter for Business and details of employees.

5. GSTIN Registration

Under the GST regime, tax is payable if the turnover of Rs.20 lakhs (Rs. 10 lakhs for North Eastern states & Special Category States) is achieved. All business liable to pay GST shall register and obtain GSTIN – a unique Goods and Services Tax Identification Number (GSTIN)

6. Professional Tax Registration

Professional Tax is levied by the local municipality on the salary paid to every individual. The tax rate differs from state to state. For payment of the professional tax, most states issue a registration certificate or an enrolment number, which will be used as a reference for remitting the tax.

7. Trade License

Before commencing your business, you will need to get a trade license from the local authority, which is usually the Municipal Corporation or Panchayats. This license is issued after ensuring that the trade is carried on safely and does not harm the public.  An application for obtaining the same can be submitted through the online portal of the municipal corporation along with required documents such as incorporation certificate/ firm registration certificate, Property Tax payment receipt, Fire NOC, identity proof and address proof of the application etc. 

A NOC from police and thecorporation’s health department is also a pre-requisite in order to get this trade license.

8. Labour law Registrations

ESI (Employees State Insurance) Registration is to be obtained by all establishments, including salons in the ESI notified areas, which have more than 10 employees. Employees earning less than Rs 21,000 per month are covered under this scheme. Any establishment that is exempted from obtaining ESI registration shall obtain an Exemption Certificate.

EPF (Employees Provident Fund) registration is mandatory for all salons having 20 or more persons (10 persons in some states in India). In such cases, employees with monthly income less than Rs 15,000 shall be mandatorily covered under EPF.

9. Pollution control board intimation for white category status

A beauty Parlour/Salon falls under the white category of the industry as per the Pollution Control Board’s notification.  Hence, it does not require a pollution control board license. You will have to intimate the concerned PCB about setting up of the beauty Parlour/salon under the white category and obtain an acknowledgment from the board.

10. License for playing music or videos

In case you are planning on playing pre-recorded music at your Beauty parlour/salon you will require a public performance license issued by Phonographic Performance Limited to evidence that you comply with copyright requirements

FUNDING OPTIONS

Businesses in all industries and sizes need additional financing from time to time. With technology growing as quickly as it has, there’s a much wider variety of funding options for your salon or spa to choose from.

With a working capital loan, you can grow your salon sooner than you imagined. Here, we’ll cover how you can use additional capital for your salon and break down two popular funding options.

What Are Working Capital Loans?

Working capital loans are specialized loans designed to help businesses meet their needs. Unlike traditional financing, you don’t need to include a reason why you need the loan.

Working capital loans come in various forms:

  • Lines of credit
  • Short-term loans
  • Peer-to-peer (P2P) loans
  • Equipment loans
  • Merchant cash advances

Let us break down two options (lines of credit and P2P loans) to consider for your salon. But first, we will cover how you can use these funds for your business.

How to Use Funds to Grow Your Salon

With the right plan in place, you’ll be more likely to make the most of your funding. Before you begin applying for funding, make sure you know exactly why you want to use them and how you’ll use them to get the best return on investment. Here are four ways you can use capital to grow your salon.

  • Hire more talent.

If you’re ready to bring on more stylists, colourists and more, additional funds can help. Hiring great talent is a long-term investment and hiring the wrong people can cost your business 30 percent of its yearly earnings. With additional funds, you can invest in the right job boards (and boost your job listings) and make sure you can cover payroll for the more seasoned applicants.

  • Expand your salon.

Is your salon ready to add a manicurist or aesthetician? Are you looking to provide more hair product options?

Or maybe you are ready to purchase a larger space to bring on more clientele? Expansion can come in many ways: from offering more services or products to opening a larger location to upgrading your online website. Most small businesses are hoping to take on larger opportunities for their businesses. In fact, 59 percent apply for funding for this very reason. With additional funds, you can expand your salon sooner and better than you had hoped.

  • Stock up on your inventory.

This is one of the most common use cases for additional funds. Your salon needs to keep up with inventory in order to stay open. What happens if you run out a popular dye or shampoo/conditioner? With additional funds, you can quickly respond to consumer demand, prepare for your busy season and even set yourself apart from the competition.

  • Expand your marketing efforts.

Every business needs a marketing strategy. After all, you may offer great services and products, but no one will know about it if you don’t tell them. You can strategize in-house with a marketing manager, or you can outsource to a contractor or agency. Additional capital can help with both cases.

You should also consider investing in a high-quality camera or

Photographer/Videographer for your social channels. You want people to see the before/after of certain looks. One popular idea is showing a time lapse of someone dying their hair to a vibrant colour (for example, from dark brown to bright pink). These can see a lot of engagement.

Lines of Credit

Lines of credit are great options for small business owners. Business lines of credit are designed to help meet short-term cash needs, like covering payroll, managing cash flow, stocking up on inventory and any other operational costs.

With a line of credit, you get a fixed amount of credit extended by an online lender. You can borrow within that limit, and you only pay back what you borrow. For example, let’s say you’re approved for a line of credit up to $250,000, and you borrow $100,000 of that. You only make payments on that $100,000.

Lines of credit come in four types:

  • Revolving vs. non-revolving

With a revolving line of credit, you can borrow money multiple times, as long as you’re within your limit.
Let’s use the example from earlier. Once you pull $100,000, your limit goes down to $150,000. As you make

Payments, your limit goes back up (similarly to a credit card). Each withdrawal also has the same loan terms, considered to be one loan.

With a non-revolving line of credit, your funds may or may not replenish once you make payments. If your funds don’t replenish at all, you can be certain your line is non-revolving. However, be careful. Some non-revolving lines of credit can include replenished lines, but each withdrawal may act as an independent loan with different terms. In that case, your line is non-revolving, even though it may look like a revolving line.

  • Secured vs. unsecured

Secured lines of credit are riskier for you. With a secured loan, you’ve put some sort of collateral to qualify for funding. These lines tend to offer lower interest rates, better terms and larger lines. But if you default on the loan, you lose the assets you’ve put up for collateral.

Unsecured lines of credit are riskier for the lender because they assume more risk if a loan is defaulted on and because of this, some may come with additionalcosts, come in shorter terms and have higher interest rates.

Business lines of credit can come mix and matched based on the lender:

  • Secured revolving
  • Unsecured revolving
  • Secured non-revolving
  • Unsecured non-revolving

How to apply for a line of credit

Most lines of credit are offered through online lenders, which makes the application process much quicker and easier. Here are five important steps you need to take when applying for a line of credit online.

Find the right lender

Finding the right lender is extremely important. You want to find the best fit for your business. Choosing the right line of credit lender can depend on some important aspects:

  • How soon you need funds
  • How much you need
  • Your credit score
  • Your overall business health

Traditional lending can take weeks or even months to process. However, most online lenders can get you a decision within minutes, and funds can go into your account within a day.

In most cases, online lenders need to see a business that’s at least a year old and has a certain revenue threshold.

Gather what you need

Before you begin applying to multiple lenders all at once, make sure you have what you need for each application. Some lenders may want to see a business plan or connect online accounts (including PayPal, eBay, Amazon, social media channels, Intuit QuickBooks and more). Application can be quick, and in some cases, the more accounts you connect, the better picture they get of the health of your salon. If your salon doesn’t have much credit history, but it’s seeing a good amount of sales or even social presence, you may be able to get a better line and better terms.

Compare each loan terms

Once you have done your research and narrowed down the candidates, compare the loan terms before you accept the offer. Look at the interest and fees to see just how much you’d be paying back.

Keep an eye out for origination fees, early payment fees or late payment fees. Determine the total cost of the loan based on the term length (how long it will cost you for a 6/12/18-month loan). Finally, compare these numbers among the others.

Be honest with yourself

This is probably the most important step. Yes, you need funding, but before you sign the loan, make sure you can handle the responsibility. Look at the repayment schedule and the monthly amount, and make sure it’s not too much of a burden on your business. It’s better to grow slowly than rush when you aren’t ready.

Accept the line

Once you have completed your research and found the best fit for your business, accept the loan and start growing your salon. With a plan in place, you’ll be able to use your funds wisely to help sustain growth while maintaining in control and within budget.

ADVANTAGES VS.DISADVANTAGES FOR LINE OF CREDIT

Like any type of funding, lines of credit come with their own pros and cons. Here, we will break down three advantages and three disadvantages to consider when looking for lines of credit.

  • There’s no collateral required. Lines of credit usually come with less risk to you. Most online lenders won’t require you to put up collateral for the loan but they come with higher interest rates.
  • However, this means that the interest rates are higher because the lender secures most of the risk. This means your business will pay more over the life of the loan.
  • You can use the funds however you want. Lines of credit offer very few restrictions on how you use your funds. Of course, you should not use them for personal needs. But whatever you need to help your business, your funds are there to help but you need to consider repayment.Like we mentioned earlier, it’s extremely important to ensure we are able to make payments each month.

If you know you are going to miss a payment, ask your lender if you could have an extension but don’t do this too often. You could damage your credit.

  • They help with short-term needs. Lines of credit are designed to help cover operational costs, unexpected costs or any short-term business needs but shorter-term loans mean higher monthly payments.However, shorter term lengths often mean you pay more each month. They’re also not intended for longer-term business goals.

Peer-to-Peer Loans

Peer-to-peer (P2P) loans remove the middleman from the loan process. When you apply for a P2P loan, you’re borrowing directly from another person or business (or multiple people/businesses).

These types of loans benefit both the lenders and the borrows because they create steady incomes for lenders through interest payments while also not having as strict of requirements for borrowers (very high credit, time in business, etc.).

How to apply for a peer-to-peer loan

It’s important to remember that P2P loans are still loans.

Some borrowers may assume that since the loan isn’t from a lender or bank, it’s not technically a loan, and therefore fees may not apply to help (and they may think they can default without penalty). However, that’s not the case. Here are three important things to remember when applying for a peer-to-peer loan.

  • Check if P2P loans are available.

The first thing you should do is make sure peer-to-peer loans are available where you live. All lenders are regulated at both the federal and state level, and not every state allows platforms. A good example of this is

Iowa. P2P platforms like Lending Club and Prosper aren’t available for business owners in these states.

  • Find the right platform.

Each platform comes with a different lending criterion. Some may want a minimum annual revenue or time in business. The APR rates also vary from site-to-site as well as the loan amount you can receive. Depending on the platform, you can receive anywhere from $2,000 to $500,000 in loans. Here are some examples:

  • Street Shares: access between $2,000 and $150,000, APR between 9 and 40 percent, annual revenue of $75,000 and minimum of one year in business
  • Funding Circle: access between $25,000 and $500,000, APR between 7.4 and 36%, no minimum annual revenue and minimum of two years in business
  • Lending Club: access between $5,000 and $300,000, APR between 9.8 and 35.7%, minimum annual revenue of $50,000 and minimum of one year in business

Conduct your own research and make sure you keep an eye out for these aspects to find the best fit for your salon.

Watch out for fees

All loans have costs more than just interest rates. Unfortunately, many business owners have been fooled by being offer low-interest rates but then being slammed with high loan fees. Peer-to-peer loans often have higher fees to support platform development and infrastructure.

ADVANTAGES VS.DISADVANTAGES FOR A P2P LOAN

Just like lines of credit, peer-to-peer loans come with their own benefits and costs. Here’s a breakdown of three of each to keep in mind.

  • P2P loans look beyond credit scores. While a higher credit score can help, the process looks past them. You can explain why you need the loan, which can appeal to them more than someone without a defined plan but investors are careful. With peer-to-peer loans, investors take on more of the risk. After all, they’re investing in your business without being guaranteed they’ll see a good return on it.
  • Borrowers have a choice of loans. You are not required to take out any loan you’re offered. If the loans you’re offered don’t work for you, you can pass on them. This is known as the auction process but approval and funding times can vary.

However, because you’re being matched, the process takes longer. It could take a few minutes to a few days to even a few weeks before you get an offer.

  • You’ll be matched with an investor. With P2P loans, you don’t submit an application. Instead, you fill out your business profile, which investors review. If they like what they see, they’ll offer you funding but the application process may take longer.
  • While creating a business profile is quicker than applying for a traditional loan, they often take longer than applying for funding from online lenders.

If you’re looking to grow your salon, whether it be expanding more services, hiring new talent or opening a second location, consider these financing options. Sometimes, business owners may think taking on loans is a sign of misstep. However, that’s not true. With additional capital, small business owners can take their businesses to the next level much quicker than they had imagined.

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