To help the group of potential spa owners or those who are expanding - can you share any good, bad or just memorable experiences (a banker that was helpful or whatever) with finding money for your spa. This can cover a lot of territory because the topic is funding your business plan and not just the space and equipment. Is there anything that you think would be of help if you had to do it again??

I applied for a SBA Loan through Wells Fargo just in case I needed it. My banker was so helpful, and as it turned out I qualified for a goverment backed SBA Loan so the interest rate was lower.

What I really want to know is how do I apply for a Buisness Grant. I hear there is tons of grants out there for Women in Business. How do I apply for them? Can anyone direct me?

Tammie,

To the best of my knowledge the U.S. government does not currently provide grants for starting or expanding a small business. However, the government does offer plenty of free help in planning how to start or improve your business and in securing low-interest SBA-backed small business loans. Http://www.sba.gov/. Most grant stories are part of the great American finance folk lore.

As you have found out the SBA does not offer grants to start or expand small businesses. SBA's grant programs in the past have generally supported non-profit organizations (today even these grants have for the most part disappeared), intermediary lending institutions, and state and local governments in an effort to expand and enhance small business technical and financial assistance. I am not sure which state you are from but each state does offer various forms of help and some do offer grants for new business but most are for “high tech” or “cutting edge” new businesses.

I don't have one link for all states but if you let me know which state you are in I can give you the State Economic Development link for your state. Links to each state are different – for example there are no grants in my home state of NH where we “Live Free of Die”!

Dan, I am in Nevada. I thought it sounded to good to be true.
Thank you for your reply
Tammie

Check with your city government office...they usually have development funds (or in our case redevelopment funds) to support local businesses. I got fully funded to pay for consultants to help me create my business plan and forecast my revenue projections!

Good point

If you are looking for loans - there are other places to look even before you go to a bank. I am on two local Lending Boards and I function with a loan committee to review and award loans to local businesses. One is in the city of Rochester, NH it is called the Jobs Loan Fund and the other is a Regional Lender, a non profit, with ties to the State and Federal Governments. Both are not “give away” programs but they lend based on potential job growth and they will usually lend where a bank might not. The regional organization has no size limitations for loans or businesses. Both will even get involved in real-estate loans for facilities. So it is worth looking around. Try your local Economic Development Offices and the local Small Business Development Centers.

I have looked into this subject before, and I agree the "grants" and all the surplus money out their for funding is largely a myth. SBA's usually are paper cumbersome, which can deter people, and then the awards are usually smaller than other lending institutions, and they also had finance fees you wouldn't expect.

The most information I got relative to grants and funding for women, is searching for minority loans and awards, because yes, women are still considered a minority. They are usually government based, and a lot of paperwork, but if you can deal with that, it might be worth looking into.

I agree your local state government is a good way to start. Sometimes we need to get creative in financing. Check out a site called prosper.com, and cut out the middle man.

LL,

Yes, this type of experience is often too common. It has been my experience that if a funding/loan request is targeted correctly, the right need with the correct provider of funds, a "no" is very seldom the answer. Looking for money can be like playing Russian Roulette - without the proper homework and approach you stand to get a "no" that you may not be able to recover from. Ask questions, research and get professional help, when appropriate, because as you know TIME is MONEY and you get to make that first impression –ONCE.

All of these responses are nice....but the bottom line is, if you want to *START* a business, you must use your own funds and your own credit........or find an angel investor who believes in you - and that's usually someone you know.

After the business is established, getting a loan for expansion starts with your local banker who has watched your business grow.

Karen

karen,
I really like your input. It is my goal to always 'live within my means' as far as the spa goes.... Once you get a good track record of payments/credits, it is no biggie to get a LOC or SB loan.
Sue

Hello,

Great points here and all have a part in the mix of obtaining funds to fund your business plan. Yes, it has been my experience that the likelihood of funding a “dream” without some of your own money/equity is fairly remote. I have been lending money to businesses for twenty five years and the one generalization that is not dangerous is that there is no way to generalize about funding a business which includes spas.

The Topic is experience in funding a business plan. Yes, some “dreams” can rely on personal funds but the one reason banking has always been fun is that no one borrower or their needs are the same as the one you just finished with. Each situation is different but some aspects are the same. For example, how you present yourself and your dream to any potential money provider is perhaps the most important first hurdle. You can only borrow money if the “provider” believes you have the capacity to run a spa business that will provide cash flow to pay all the bills – which includes paying yourself.

I have had an opportunity to lend or find money for businesses and I have seen may business that have been around for years that are not good candidates for borrowing money. But the simple truth is that most businesses at some point will need to borrow money and what is easy for some may not be so easy for another.

Is there anyone that has a good or bad experience in borrowing money for their spa that they might share as a learning experience for all? Or, if not, does anyone have a dream they would like to share – a new spa or an expanding spa- that we could use as an example and walk it through the “borrowing process”. If we get several we can vote on the one we would like to work on.

Also, just one note of caution, yes, there is money out there that in some cases my seem too easy to obtain - if this happens to you the hair on your back or wherever should be standing out straight. Remember that in borrowing situations there is RISK, something like Einstein's theory of relativity that energy is never destroyed, RISK in borrowing is never NOT there – it is distributed between the borrower and provider. The distribution should be relatively even. (That way you get to keep your home and / or other important "stuff")

I can really relate!

I own a mobile day spa, been open for two years. I had a small one room place for clients to come to with gift certificates, etc. I found that a lot more people wanted to come in for other services as well.

In February 2006 I decided to open something bigger in a better location. I was thinking a couple of hair people and a couple of treatment rooms.

WELL in the good areas rent is going for $22.00 a square foot - that was unattainable for me with two people. Then I started looking into booth rental, etc. I talked with lots of hair people.

I finally decided to go BIG - this would ensure having enough hair stylist to cover the overhead.

I worked up a buisness plan with the numbers, found a location, did a floor plan and starting meeting people. My bank laughed at me - yeah right.

I guess I should mention here that my personal credit is not so great - I had to do a bankruptcy 6 years ago after my divorce. I have rebuilt my credit, but it is only at a 610 right now.

I then went to some meetings at "Missouri Venture Forum" a place where investors and angel investors meet. You can apply to do a presentation. I did, paid $75.00 for it and we did a great presentation, but got nothing out of it. These people are looking for investments in the millions!

I then started working with a gentleman who said he could get me an investor - ya da ya da -- that did not pan out either.

I then found a friend whose investment banker said he would take a look. He told me to get the hair stylist that would be booth renters first and then he could help me. I spent $3,000 to send out really nice postcards to all thelicensed hair stylist in my area and I set up an interview date. I got 14 sign ups and 7 verbal interested.

At the time that I met with him, I was under the impression that I could get $100,000 in equipment from a company that "said" they could - I had been working with this lady for 4 months and she kept saying "I can get you $100,00" but I need this... and I need this... and I need this...-

So I go a potential investor who was going to bring in the rest - another $100,000, and then boom the lady I had been working with for 4 months says she can't get me anything.

I went to another equipment lease/loan company and they were able to get me $35,000, in the mean time I lost the investor.

Now I am bact to square one - I have $35,000 in a lease loan and nada else. I can make it work with another $100,000 by downsizing some things, but I am just not sure where else to go to now.

My parents are considering doing a 2nd mortgage, but that would only give me $50,000, I would still need another $50,000.

It has been quite an uphill battle - but I have not given up yet - I think miracles do happen - I will get mine too - it just may take longer than I expected. I have all these people waiting on me for employment now - a builder who has the location for me and he is willing to do all of my buildout with only $20,000 from me. It is in a totally awesome location..... so I wait and keep thinking - something will happen.

So it has been 8 months in the works - and I am still working - I have lots of things in place, but without the money can not go forward.

....yeah, and it doesn't stop there! Once you get the money, then you contractor doubles his price AND runs 6 months behind schedule. Then the stylists won't come, something will have changed, or they won't want a smaller place. Those who do come will have no clientelle and expect you to supply them all (advertising $$$$$), then leave and take them to a cheaper place. Your spa will be filled with salon drama, and be very unspa like. We thought of a "big place" (just like everyone wants to have a dozen places and "own the town") but THANK GOD we didn't go there!
Everything happens for a reason, and it doesn't get any easier. Plug in the numbers for paying back $125K, then the money needed to keep a place like that running for 2 years (probably another $240k) then your salary for the last year and next 2 (let's say $135k or $45k/year) = half a million! So $250k/year is needed, which is about $700 day. Doesn't seem so bad, you plug in "$1,000/day minimum" into your numbers and you say no problem. Reality is that your minimum day will be ZERO, not $1,000. And you'll have a lot of 'em to start with. So now you're working for free, risking your parents money, and hoping to keep things together and become THE place to be in town to make it work. We have an aveda salon in town with nearly 100 hair chairs, and only have about 6 there at a time, not the best image to portray.

My dh is the local banker and tells me Im a risk !! ha ha

Geez, and to think I have been nervous about taking on 1/2 of a $525 rent with another MT ??!!!! and I can walk to work !!! No way do I have any desire to do a big project.....way out my league and budget !
Im staying small, simple, classy, but not too over the top.

Good luck dear...hope it all works out for you !

Mary

WHOA! Before we get any more negative, and scare off fabulous prospective business owners, let's look at a few factors in the $ formula.

If you cannot psychologically take huge risks, then don't.
If you have young children, a new mortgage, or large preexisting debt, then take very serious consideration before you borrow lots of money.

There are good times and good reasons to borrow big loans. Not everyone needs a huge loan. Some folks' dreams are bigger than others! Everyone has a different comfort level.
I bet the Prestons and the owners of Canyon Ranch, and all the other spa-entrepreneurs out there took a big gulp when they signed their first million-$ contract.
You must draw up a business plan, do the #s, and determine what level of risk you are willing to take.

And I don't believe in "doing it all yourself", financially. The main reason small businesses go under is under-funding, not enough start-up capital.

I bet Skip Williams will be the first to tell you that new spa owners get romaticized views of their new business, without a realistic sense of how much $ it really takes. Then they're stressed. Are you willing to take that risk?

Personally, I have been trying to build my business for years with my own money. It's allright, but I only get "so far" on my own. It's time to grow, and I don't have a hubby or parents with $. So, borrow I must. But it's not for lack of trying on my own, and I DREAM BIG.
For me, dreaming big means that right now I am borrowing $20,000. This project does not need $100,000. I'm not ready or willing to throw that kind of money into a project...yet.

Hi all,

Great discussion here! It can sound very complicated at times – funding your dream. There should be some “fear” involved, however, offset it with building confidence in your own ability find the money you need. When I began lending I was taught that the business of lending money was both an art and a science. Likewise, borrowing money is both an art and a science. You just need to find your formula for success, and to work “smart” in the process. I think some of you have found that you have wasted both time and money looking for a way to fund your spa dream.

A couple of you have alluded to the important point that your dream has to be connected to your reality. One thing we all share as human beings is the tendency, if not an inability, to figure out our own realities. Our spa business reality contains such items as business experience, personal life experiences, credit experience, personal and business credit history, personal assets, education (both school and “hard knocks”), and knowledge of the spa industry, business plan, and understanding the “money pipeline” - all go into your personal borrowing equation. The money pipeline is your ability to match all the above to the right amount of money needed, correct mix of short and long term funding, correct type of funding, most appropriate lender(s) and funding vehicles.

You want a “yes” from a machine, a system, or a person.

These few paragraphs hope to illustrate that lending money and borrowing money are very similar. They function under the same rules of the road. Yes, some of you can do it your self but for most of us we need the help of a professional in the field, either in the form of a spa professional’s book, a seminar, software program, spa board or a professional consultant to help you work smart, build confidence, understand the industry and ultimately your personal borrowing equation.

Borrowing and lending money is not just an application process it is built on a philosophy, accept and understand the philosophy then funding your spa dream will make more sense as it relates to your reality. Master your reality and the lending philosophy – and you will be ready for the road!

Great post Dan!