Lately, Canada’s tobacco and nicotine product markets have seen an influx in vape users, particularly in the 15 – 25 age range. Actually, recent surveys have shown that a growing percentage of these young consumers regularly use or have at least tried a nicotine or nicotine-free vaporizer at some point.
With more people purchasing vaporizers, e-liquid, and vaporizer accessories these days, many entrepreneurs are now breaking into the market by opening their own stores. The biggest problem is that building a business can require a significant amount of funding. That’s why a business loan can be the perfect financial solution for your vape shop.
Interested in opening a Cannabis business? Check out how a business loan can help you start a Cannabis business.
How Can a Business Loan Help My Vape Shop?
When establishing a business, the first thing you’ll need to figure out how you’ll be financing the various startup costs involved. Don’t worry, because a business loan is a specific amount of money that gets deposited directly into your business bank account soon after you’ve been approved by the lender of your choosing.
Once you have that loan money, you can use it on almost any business expense your vape shop incurs. However, since your loan will need to be repaid at some point, it’s best to only spend your funding on costs that are absolutely essential, such as:
- Buying or leasing real estate (land, buildings, etc.)
- Buying or renting equipment (cash registers, display cases, etc.)
- Restocking your supplies and products (cartridges, batteries, etc.)
- Paying your property costs (taxes, utilities, etc.)
- Hiring staff and setting up payroll
- Renovations, furnishings and maintenance
- Expanding to a new or secondary location
- Buying or renting advertising space
- Making leasehold improvements
Business Financing For Any Industry
Own a business in another industry? Click here
Where Can You Find a Business Loan For Your Vape Shop?
There are several places that you can apply for a business loan in Canada, each with its own benefits and drawbacks. Be sure to do lots of research before you apply:
Banks
- Canada’s major banks are often a primary choice because they can approve larger loans, have better security and charge more affordable interest rates than other financing sources, particularly to preferred clients.
- Sometimes banks are harder to qualify with because of their tighter approval restrictions. This is particularly true for new businesses and clients with bad credit, weak revenues, debt problems, or non-viable business plans.
Credit Unions
- Credit unions are also popular for business loans, as they may offer you a lower rate, a range of loan options and extra benefits for being a union member. Other members can even invest in or buy shares of your vape shop.
- They may require a certain level of financial competency to become a member, despite having easier business loan restrictions than a bank. It can be complicated and tedious to get approved as a new client.
Alternative Lenders
- Alternative lenders are often preferable because they have more flexible approval standards than banks and credit unions. There are also specialized business lenders that offer larger loans, better terms and fast online financing.
- Just keep in mind that you may be charged higher rates, especially if you have bad credit or a low income. They are also less regulated than financial institutions, so you must be cautious when applying.
Check out why you should consider getting a private business loan.
Government Funding
- Depending on where your business is and what type of products or services it sells, it may be eligible for the CSBFP (Canada Small Business Financing Program) through the federal government.
- The CSBFP helps for-profit small businesses or start-ups qualify for funding with banks, credit unions and Caisse Populaires. The government accepts a share of the risk they would otherwise take by approving you.
- To be eligible, your small business or start-up must be operating within Canada and earning gross yearly revenue of $10M or less. You’ll also have to apply with a participating financial institution.
- Although certain restrictions apply, the CSBFP can boost the strength of your business proposal, helping your vape shop qualify for:
- A loan of up to $350,000 to finance business equipment, vehicles and renovations to properties being leased by tenants.
- A loan of up to $1,000,000 for buying and making improvements to commercial properties.
Check out more government finance options for businesses in Canada.
Best Vape Shop Business Loan Providers in Canada
| Amount | APR | Term (months) | ||
 | 1k-300k | Fee-Based: Starting at 9% | 12- 60 | Learn more |
 | 5k-300k | 8% – 29% | 6-18 | Learn more |
 | 1k-500k | +5.9% | 3-60 | Learn more |
 | Up to 300k | 8%-22% | 6-12 | Learn more |
 | 5k-500k | - | 6-18 | Learn more |
 | 100K + | 6.05% + | 60 | Learn more |
 | 5K-100k | 15%+ | 12-18 | Learn more |
What Are the Requirements For a Business Loan For Your Vape Shop?
No matter the size or location of your vape shop, you will likely need additional financing to get things operational. Since such large amounts of financing can pose a lot of risk for any lenders, they must thoroughly inspect the financial health of you and your business. Documents that may be checked or that you’ll have to provide include:
- Personal Credit Score – Ranging from 300 to 900, your credit score tells the lender how you handle your debts. The higher your score is, the less risky you’re considered, so the more likely you’ll be to get approved for a business loan with a good interest rate and repayment term.
- Business Credit Score – If your vape shop is already semi-established, it will have its own business credit score. While normally ranging from 0 to 100, every credit bureau has its own scoring system. Similar to your personal score, it tells the lender if your business has been borrowing and paying its debts responsibly.
- Business Plan – Your business proposal must be just as strong as your finances. You’ll have an easier time qualifying if you can prove your vape shop is (or will soon be) earning revenue that would sufficiently cover your payments. This is even more important when applying for government funding.
- Financial Documents – Your vape shop’s income, other debts or investments and profit margins are more important overall. During the financial inspection, your business may have to provide various details, such as its:
- Most recent income, bank & credit card statements
- Tax returns from previous years
- Sales and revenue data
- License and insurance information
- Owners, partners, other investors, etc.
Alternative Financing Options For Vape Shops
Benefits aside, a business loan might not actually be the right type of financing for your vape shop. Luckily, there are several other business financing options available in Canada, including but not restricted to:
- Invoice Factoring – You sell a portion of your vape shop’s unpaid invoices to a third-party factoring company, in exchange for financing. Although factoring companies will buy your accounts receivable for a percentage of what they’re worth, it’s an easier way to get funded, especially if you have weaker business credit or finances.
- Business Line of Credit – Rather than a specific loan sum and equally divided payments, you’ll have a revolving credit limit that you can withdraw from and repay in monthly balances. This can be more ideal for vape shops because, like a credit card or personal line of credit, you can make minimum or partial payments when you can’t afford full ones.
- Merchant Cash Advance – Like a business loan, a merchant cash advance involves a lump sum of borrowed money, repaid in installments. However, the lender’s fee will be a percentage of your shop’s upcoming debit and credit card sales. Typically, terms are shorter (around 2 years) and have smaller, more frequent payments (often weekly).
5 Steps For Starting Your Vape Shop
While funding is important, there are plenty of other things to consider when establishing a business. Not to mention, lenders are generally more receptive to applicants who are well prepared and financially stable. So, before you apply for a business loan for your vape shop, here are some essential steps to take:
Study Canada’s Vaping Laws
As with any tobacco or nicotine product, there are many federal and provincial/territorial laws that your vape shop must follow to become a legal business. For example:
- The Tobacco and Vaping Product Act protects potential consumers (particularly youths) from the consumption of nicotine or addiction problems. As such, your shop cannot sell, give or advertise its products toward any Canadians under the age of 18.
- According to the Food and Drugs Act, any products you sell have to meet Health Canada’s safety requirements. Additionally, products must be labelled and packaged with proper health warnings (nicotine content, etc.) before they can be marketed, sold in Canada or imported commercially.
- If you’re planning to sell cannabis products, they must also pass federal and provincial/territorial regulations. For instance, the Cannabis Act and Canada Consumer Product Safety Act are also in place to help youths and non-smokers avoid any harmful effects of vapor, batteries, etc.
Create a Business Plan
As mentioned, your business proposal is one of the first factors a lender will inspect when you apply. The more lucrative your plan is, the more financing your vape shop will receive and better your loan conditions will be. To qualify, your plan should feature all the relevant details, such as your:
- Assets & Liabilities
- Current Revenue & Projected Revenue
- Staffing Details
- Products & Services
- Partner(s), Co-Owner(s), Co-Signers & Investor(s)
- Financial Status (income, debts, etc.)
Check out this guide on creating success with a 5 year business plan.
Understand Your Costs
While your business loan payments could make up a significant portion of the debt your vape shop accumulates, there are many other costs to factor into your budget, like:
- Interest & Fees (debts, bills, etc.)
- Property Costs (utilities, taxes, etc.)
- Licensing Costs (permits, inspections, etc.)
- Staffing Costs (training, salaries, etc.)
- Inventory Costs (sales, distribution, etc.)
Learn how to manage your small business inventory.
Register Your Business
Remember, your vape shop must pass all federal and provincial/territorial laws to become a legal business in Canada. That includes acquiring and updating all the proper permits and licenses, which can use up company time and money. This is particularly true for businesses that sell tobacco, nicotine and cannabis products, where extra regulations apply and more documentation is required.
Don’t Forget Insurance
Insuring your vape shop is equally important, in case you need coverage following a break-in, emergency or legal situation. It’s also good to insure any business vehicles and equipment. The more liabilities your vape shop has, the more insurance it needs, especially if it sells potentially dangerous products.
FAQs
How can I finance my vape shop?
Although the costs can be numerous and many regulations apply, there are several ways to finance your vape shop, such as:
- Unsecured Business Loan – A lump sum of money, repaid in installments, with no security necessary (smaller loan, higher interest rate).
- Secured Business Loan – A similar sum and repayment plan, only using an asset (building, vehicle, etc.) as collateral (larger loan, lower interest rate).
- Business Line of Credit – A revolving credit limit, where interest is only charged on balances owed (good for recurring expenses).
Do I need a business plan to get a loan for my vape shop?
Yes, you will need a detailed and viable business plan to get approved for most types of business financing. You have to show your potential lender that your vape shop will be making a revenue that will support any payments, fees, and interest involved. The better your plan is, the larger and more affordable your business loan will be overall.
How much does it cost to open a vape shop?
No matter how big your vape shop is or what kinds of products it sells, there are countless singular and recurring costs that you’ll encounter, including but not limited to:
- Purchasing or Leasing Real Estate
- Buying & Shipping Inventory
- Licensing & Permits
- Property Maintenance & Repairs
- Physical & Viral Marketing
- Equipment & Vehicles
- Taxes & Utilities
Ready to Open Your Vape Shop?
In that case, a business loan might be exactly what you need. After all, opening a vape is by no means cheap and it’s important to keep up with all your expenses to avoid any financial problems going forward. For more information about business loans for vape shops in your region, Loans Canada can help.
