All Canadian business owners know, to make money you need to spend money. Whether you spend your money on the best possible products or employees or a great new location is up to you, but the one thing we can’t recommend enough is a great business loan from the right lender.
Benefits of a Business Loan
Once your key financial issues are resolved (paying your lease, getting business and animal-care licenses, insurance costs, etc.) there are tons of other places in your grooming business where you can invest your brand new loan, such as:
Buying and financing the future costs of a mobile business vehicle to do house-calls
Being able to choose the right spot for your salon or relocate to a new space when your current location isn’t working for you
Hiring a graphic design company to make you a storefront window logo, customized bandanas, business cards, and other advertising tools
Constructing and furnishing a comfortable waiting from for your customers and their animals
Getting all the best grooming tools (hair dryers, brushes, shears, scissors, nail clippers, electric clippers, etc.)
What Should You Look For in a Business Loan as a Pet Groomer?
As a business owner, you can access a few types of loans in Canada, each with different benefits and drawbacks. That said, there are two key things to look for in every business loan, especially if your pet grooming salon is new.
Cost of The Loan
Before you apply for your business loan, one of the first things to consider is how much it will cost you. Here are some of the main costs to watch out for:
Interest – The interest rate your lender charges can significantly increase the cost of your business loan. Generally, the more financially sound your pet grooming business is, the lower your interest rate will be (although every lender offers different rates). You may also be able to decide between a fixed rate, which won’t change during your payment term and a variable rate, which will fluctuate with Canada’s prime rate.
Term – The length of your repayment term can also affect how much interest you’ll pay overall. Shorter terms typically come with higher rates and larger loan payments, which some business owners consider less affordable. However, despite their potential for lower rates and smaller payments, longer terms mean that you’ll pay more interest. Normally, the stronger your business finances are, the easier it is to qualify for a longer repayment term.
Fees – Your business loan can come with a range of fees on a one-time or per-payment basis, such as administrative fees for services your lender performs when you apply or make payments (loan origination, documentation, etc.). Additionally, you could be subject to penalty fees for every late, incomplete or missed payment. Be careful. While these fees may not seem like much at first, they can add up quickly over time.
It’s also important to know who you could be borrowing from. Although every lending source has its upsides and downsides, there are three elements that you should focus on in particular before you give away any personal or financial information:
The Lender’s Reputation – Never apply with any lender that doesn’t have good customer reviews and a longstanding history in the financial community. They should also have a page with the Better Business Bureau that displays their registration and licensing details. If the lender doesn’t have these credentials, walk away, as they could try to scam you or steal your identity.
Their Experience in the Grooming Industry – While plenty of lenders are known for funding a wide variety of businesses, it’s essential to choose a financing source that understands your particular industry. After all, pet grooming businesses come with many expenses and other factors to think about, so it’s best if your lender knows what they’re doing and offers flexible loan conditions.
Their Costs and Loan Conditions – Most good lenders will include their products’ main costs and conditions somewhere on their webpage. If not, their customer service should answer any questions you have. If they avoid your questions, charge fees/rates that seem extremely high or refuse to give you information about their loans, it’s another clear sign that they may be a scammer.
What Factors to Lenders Look For When Qualifying a Pet Groomer For Financing?
Plenty of lenders will approve your pet grooming business, whether it’s an established company or a startup. However, you may need to borrow a lot of money, which is risky for the lender, so it’s a good idea to show them that you’re a responsible business owner with a strong chance of repaying them on time.
Here are some of the main personal and financial information that lenders will examine before they approve you for a business loan:
Personal Credit Score & Business Credit Score
Your personal credit score ranges from 300 to 900 and a slightly different version of it is held by both of Canada’s main credit bureaus (Equifax and TransUnion). There are multiple versions of your business credit score on file at Equifax, TransUnion and Dun & Bradstreet but most of them range from 0 to 100.
Some lenders will check both of these scores when you apply because they showcase you and your business’s ability to pay your debts. The higher these scores are, the easier it will be to qualify for a large loan with good conditions, as a high score tells them you’ve been a responsible borrower in the past (and vice versa).
Revenue & Cash Flow
Your pet grooming business’s revenue and cash flow are also primary factors that lenders will examine before they approve you. This can include any money your business is currently earning, as well as its projected profit margins. Once again, the stronger these factors are, the better your approval odds and loan conditions will be.
Most business lenders also need to know about your assets and liabilities. While this can include personal debts like your home mortgage, most lenders will be more focused on your business assets, such as real estate, equipment and vehicles. Any major debts you already have could prevent you from paying back your loan.
Plus, you may need to use one of your assets as collateral for a secured loan. Since they would temporarily own your asset and will have something to sell if you default, lenders may be more willing to approve you if you have valuable collateral to offer.
The more unpaid debt you and your business are carrying, the harder it will be to get approved for an appealing loan. For the best approval results and future loan conditions, experts recommend that you apply when you have a maximum debt-to-income ratio of 30% – 35%. If you or your pet grooming business do have a lot of debt, make sure it’s being paid down consistently, especially when it comes to revolving debts like business credit cards or lines of credit.
Time in Business
As mentioned, plenty of lenders will approve your pet grooming business for financing, even if it’s a startup. That said, it will usually be easier to qualify if you’re an established pet groomer with lots of experience in the industry. You’ll also be considered more creditworthy if your business is already making a decent revenue and you present a solid business plan when you apply.
Like a regular credit card, a business credit card gives you access to a revolving credit limit. You can borrow from it when necessary and be left with a monthly balance to pay off. Overall, a business credit card is one of the simplest payment alternatives that you can use to cover your pet grooming salon’s smaller or recurring expenses, such as:
Everyday supplies (shampoos, animal treats, etc.)
Common bills (internet, utilities, etc.)
Delivery & shipping fees
As a professional pet groomer, you might want a business credit card because:
It’s a good way to build your business credit history and score
Some cards come with perks, like reward points
Approval is often easier to get than other payment alternatives
Business Line of Credit
A business line of credit involves a revolving credit limit that you can withdraw from and repay on a monthly basis. However, your lender will probably give you a special debit card that you can use to make transactions. All this can make a business line of credit perfect for short-term or unexpected costs, like:
You might prefer a business line of credit because:
You may get approved for a larger credit limit than a business credit card
You’ll also have the option of making minimum or partial payments
It’s another simple way to build and improve your credit
You only have to pay interest on the amounts you spend (like a credit card)
Merchant Cash Advance
A merchant cash advance allows you to access continual funding in exchange for a percentage of your pet grooming salon’s future debit and credit card sales. Unlike a traditional business loan, credit card or line of credit, a merchant cash advance is more of a short-term solution, making it a good payment option for:
Employee salaries & benefits packages
Marketing costs (advertisements, signage, etc.)
Stocking a gift shop (leashes, pet cleaning products, etc.)
You might choose a merchant cash advance over other payment options because:
The better your card sales are, the more funding you can access
You won’t have to offer collateral to get approved
You may not have to deal with a strict payment plan (terms are open-ended)
Access to cash is more continual than with a set loan amount or credit limit
Similar to a business loan, an equipment loan can help you borrow a set amount of liquid cash that you repay over several months or years. Some lenders can also pay an equipment provider directly. However, unlike other payment options, this type of loan is meant specifically for financing business equipment, such as:
In certain cases, government business financing can be the best option because:
You may have access to more capital than with normal business financing
The government provides better financial protection than a regular lender
Some governments offer a variety of loans, grants and financing programs
Some programs help your business during times of crisis, like COVID-19
Business Loans For Pet Groomers - FAQs
Can I qualify for a business loan to start my pet grooming business?
It’s true that many lenders will fund a startup pet grooming business. Nonetheless, some new businesses have trouble securing this type of financing due to the sheer lack of revenue and financial information involved. Luckily, there are many alternative lending sources that will approve you for a business loan, as long as you can provide what they’re looking for, such as:
A viable business plan with all the right details (projected revenue, etc.)
A valid business license and other required credentials
A decent business credit history and score
Little-to-no existing debt on your financial profile
Some security to offer (collateral, cosigner, etc.)
Some form of income to cover your loan payments
Do I need a license to start a pet grooming business?
Yes, you may need various business licenses and permits from the federal, provincial/territorial and/or municipal government to legally build your pet grooming business. The same principle may apply to any other pet care service you start, like:
Mobile pet grooming or clean-up
Pet-sitting or dog walking
Kennel or housing
Behavioral training or advice
Animal sales and supply locations
The exact permissions your pet grooming business will require, as well as the taxes it will eventually have to pay depends on where it’s located and what kinds of services or products it’s going to sell. Additionally, you’ll have to register your business name and structure as a corporation, sole proprietorship, partnership or co-operative. Essentially, because you’ll be working with animals and products that may be harmful to the environment, your pet salon may require more than a general business license. Contact your local government to find out what licenses, permits and zoning restrictions apply to your pet grooming business before you try to get it funded.
Can I get a loan for my business if I have bad personal credit?
Remember, some lenders will look at your personal and business credit before approving you. If these elements are weak, it may be because you missed multiple payments or experienced other debt issues in the past. As such, you’ll be considered a riskier client and may not qualify, at least not for a loan that’s large enough to fund your pet grooming business or has appealing rates/conditions. Unfortunately, this is particularly problematic with banks and credit unions, which have strict borrowing standards. Don’t worry, there are many alternative lenders that will finance your pet grooming salon if you have bad personal or business credit, as long as you’re potentially willing to deal with smaller loans, shorter terms and higher rates.
The Business Loan You Need is Only a Click Away
Remember, whenever you need a reliable business loan for your pet salon, you don’t need to look far. Loans Canada can connect you with the best lender who meets all your needs.
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