You’ve found a hair salon franchise for sale, you’ve read the disclosure documents, and you like what you see.
Where does the money come from?
Most franchise buyers assemble funding from two or three sources, and the combination is different for almost everyone. This article walks through the categories of funding that exist, what each one generally involves, and what lenders tend to look at when they evaluate a candidate.
Up front: Snip-its does not offer direct financing. We can provide resources outlining the types of franchise funding available so a candidate can make an informed decision about which conversations to have.
Start With the Number You’re Actually Funding
Before you compare funding sources, you need a target, and it isn’t the franchise fee. It’s the full estimated initial investment, plus a cushion.
Item 7 of our 2024 Franchise Disclosure Document estimates a total initial investment of $200,470 to $360,825 for a single Snip-its salon. The initial franchise fee is $35,000 of that.
| Item 7 Line Item (2024 FDD) | Estimated Range |
| Initial Franchise Fee | $35,000 |
| Base Construction and Leasehold Improvements | $47,975 to $100,775 |
| Millwork | $35,200 to $52,000 |
| “Snipification” of Salon | $20,700 to $23,100 |
| Grand Opening Program | $15,000 |
| Security Deposit and Rent | $7,500 to $20,000 |
| Additional Funds, 3 Months | $5,450 to $20,600 |
| Total estimated initial investment | $200,470 to $360,825 |
Two things to notice. First, construction and millwork together represent the largest share, which is why lenders often want to see contractor bids. Second, the estimate includes additional funds for the first three months, which is working capital. Candidates who fund only the build and forget the opening months create a problem.
Multi-unit structures change the arithmetic. Item 7 of the 2024 Franchise Disclosure Document also estimates the initial investment for our Multi-3, Multi-5 and Multi-5 Plus structures. For a fuller breakdown, the cost page is the place to look.
How Buyers Fund a Hair Salon Franchise for Sale
Each of these is a real category with real requirements, and each suits a different financial picture.
Conventional Bank Lending
A commercial loan from a bank or credit union, underwritten on the strength of the borrower and the business plan. Banks typically want a meaningful down payment from the borrower’s own funds, collateral, a documented plan, and a credit history that supports the request.
Some lenders have more appetite for franchise concepts than others, because a franchised business comes with a documented system and a brand rather than an untested idea. Community banks that already lend to retail service businesses in your market are often more receptive.
SBA-Backed Lending
The U.S. Small Business Administration doesn’t lend directly in most cases. It guarantees a portion of loans made by participating lenders, which can make a lender more willing to work with a small business borrower. SBA-backed loans are a very common route for franchise purchases.
Applications generally require substantial documentation: personal financial statements, a business plan, use-of-funds detail, and information about the franchise itself. The SBA’s own website is the right place to understand programs and eligibility, and the process takes time, so start early.
Retirement Rollover Structures
There are established structures that allow a candidate to use retirement funds to capitalize a business without taking a taxable distribution. They involve forming a corporation, establishing a qualified retirement plan, and following specific rules precisely.
This category is heavily regulated. Anyone considering it needs a specialist provider and a tax professional involved from the start, not after the fact.
Home Equity
Some buyers borrow against equity in a primary residence, through a line of credit or a loan, which is often simpler to arrange than commercial lending.
It also puts a personal asset behind a business obligation. That’s a real consideration for a conversation with a financial advisor and, frankly, with anyone else who lives in the house.
Partner or Investor Capital
Bringing in a partner or an outside investor reduces the capital you personally need and can add operating experience or local knowledge. It also introduces a second decision maker.
Partnership structures need documentation before anyone contributes money: who decides what, how profits and losses are allocated, and what happens if someone wants out. A franchise attorney should paper this properly. Note too that the franchisor will typically need to approve the ownership structure, so raise it during the application process rather than after.
Seller Notes on a Resale
When you’re buying an existing location rather than building new, the departing owner sometimes agrees to carry part of the purchase price as a note, paid over time. It’s a negotiated arrangement between buyer and seller, not a program you apply for.
Buyers often read a willingness to carry a note as a signal of the seller’s confidence, though it doesn’t substitute for your own diligence. Transfers also require franchisor approval, so a seller note is one piece of a larger approval process rather than a shortcut around it.
What Lenders Generally Want to See From a Candidate
The specifics vary by lender and program, and nothing here predicts an outcome. But the categories of information requested are fairly consistent.
- Liquid capital and net worth. Lenders want to see that you have funds of your own in the deal and reserves behind it.
- Credit history. Documented and explained where there’s anything unusual.
- A business plan. What the location is, where it is, who staffs it, and how the model works.
- Use of funds. A line-by-line account of where the money goes, usually mapped against Item 7.
- Relevant experience. Management, hiring, retail, or service operations. You don’t need to know how to cut hair to own a children’s salon, and lenders understand that the owner’s job is hiring and managing talented people and following the system.
- Franchise documentation. The FDD, the franchise agreement, and often information about the brand and its support structure.
Vague answers about the concept, missing documents, or an unclear use of funds are what slow applications down.
Why Most Buyers Use Two or Three Sources
Lenders generally expect borrowers to contribute some of their own capital, which means a loan alone rarely covers the whole picture. Different sources also suit different components: a lender may be comfortable financing equipment and build-out but less interested in funding working capital. Timing is a factor too, since an SBA-backed application runs on its own schedule.
So the practical question isn’t which single source to use. It’s “what combination covers the full estimated investment, with a cushion, on a timeline that matches the build”.
Build Your Team Before You Build Your Salon
Every route described above has legal, tax and accounting consequences that depend on your specific situation. A qualified lender can tell you what you’re eligible for, an accountant what a structure does to your tax position, and a franchise attorney what the franchise agreement and the lease actually commit you to.
None of those three roles is optional. The FTC’s franchise guidance explains what the Franchise Disclosure Document must disclose and why the review period exists, and the International Franchise Association publishes general education for prospective franchisees.
Where a franchisor makes financial performance representations, they appear in Item 19 of the Franchise Disclosure Document, which is the document your accountant should be reading.
Where to Go From Here
If you’re evaluating a hair salon franchise for sale and want to understand the funding picture, the most useful next step is a conversation. We founded Snip-its in 1995 and have given millions of haircuts since, so we’ve walked a lot of candidates through this stage.
Start with what a Snip-its franchise actually is, review the next steps, then request franchise information or call 952-288-2222, ext 5.
This is not an offering. An offering can only be made by a Franchise Disclosure Document.
Frequently Asked Questions
Does Snip-its provide financing for a franchise purchase?
No. Snip-its does not offer direct financing. We can provide resources outlining the types of franchise funding that exist, and candidates start that conversation through the inquiry form. Lending decisions rest with qualified lenders.
What funding sources do franchise buyers typically use?
The common categories are conventional bank lending, SBA-backed lending through a participating lender, retirement rollover structures, home equity borrowing, partner or investor capital, and, on a resale, a seller note. Each has different requirements, which is why a lender, accountant and franchise attorney should be involved.
How much does a single Snip-its salon require?
Item 7 of our 2024 Franchise Disclosure Document estimates a total initial investment of $200,470 to $360,825 for a single unit, including a $35,000 initial franchise fee. That estimate covers build-out, initial marketing, grand opening, inventory and working capital.
Why do buyers combine several funding sources?
Because lenders generally expect a borrower to contribute capital of their own, different sources suit different parts of the investment, and approval timelines don’t always match when costs come due. A combination that covers the full estimated investment plus a cushion is more common than a single source.
Who should review the numbers before a candidate commits?
A qualified lender, an accountant and a franchise attorney, all three. The lender addresses eligibility, the accountant tax and cash flow, and the attorney the franchise agreement and lease. Where a franchisor makes financial performance representations, those appear in Item 19 of the Franchise Disclosure Document.