One of the main things that both seasoned and novice business owners have in common? The need for financing to help grow and build their companies. If you’re a Canadian business owner and you’re looking to take your business to the help level, we can help. We’ll leverage our years of experience to match you with a lender who meets all your needs and can get you the loan you need to succeed.
The Right Financing is Key
Since there are so many different costs to consider as a pet store owner, it’s better if you don’t have to search through your sofa cushions, looking for enough extra money to see your business plan through to its completion. Not only should your store succeed, but you also should never have to worry about getting where you’re going to get your funding from. You’re in luck, Loans Canada has the solution to your money problems! To learn more about what a good business loan can do for you, keep reading.
Business Loan Eligibility Requirements For Pet Stores
In order to qualify for a business loan, both the company and its owner must meet certain criteria. The requirements are structured to identify reliable borrowers, those who will be able to repay the loan responsibly. To determine the merit of a potential borrower, lenders will require:
Personal and Business Credit Score
Both you and your business will have a credit score. This score is set forth by the Canadian credit bureaus, TransUnion and Equifax. Analyzing your debt, payments, and other criteria, the bureaus assign you a credit score. The higher the number, the better your credit and the more likely you will qualify for a loan with good terms.
Revenue
A good measure of the quantity of business your pet store does, revenue refers to the money that your company earns through its regular business operations. It gives a potential lender a picture of how much money you take in before expenses.
Cash Flow
Pet stores have overheads, ranging from the animals in their care to the building in which they operate. Cash flow follows the money after expenses. The net amount gives a lender an idea of how liquid your funds are. This is the money that would be used to pay the loan installments, so is naturally an important metric.
Assets
Assets are property or valuable items owned by your business. This can be vehicles, real estate, equipment, etc. It gives the lender an idea of what your company owns, which, if needed, could be liquidated and used to repay a loan.
Check out how you can use your business assets to secure a loan.
Debt
Especially if the business is structured as a sole proprietorship, the lender will be interested in both the debt of the business and that of the owner. Loans qualification is calculated by (among other things) a measure of debt-to-income. This ratio shows whether you are logically able to repay the debt of the business loan you are seeking. Naturally, it is preferable to have less debt.
Time in Business
Particularly to companies with unique operations such as pet stores, the lender will want proof of concept. Unlike other companies, a great deal of your inventory is vulnerable to a wide variety of issues. This factors into operational costs; and, without a proven history of successful business operations, can make you appear a high-risk borrower. Conversely, more time in business highlights that you know how to turn a profit, making you a more desirable borrower.
Find The Right Business Financing Based on Your Needs
Documents Required to Apply For Business Financing
In order to substantiate the claims you are making about your business, the lender will require specific documentation. By properly organizing and presenting your information, you can showcase your business’ merit, as well as your administrative capacity. Items you will need are:
- Business Plan: When you request a loan, it is important to have a full explanation of how you plan to spend the money. The focus of any loan is a return on investment. For the lender, this is through the interest. However, they are also interested in the revenue of the borrower, since it will be this money that the pet store uses to repay the loan.
Financial Documents: Provide any relevant financial paperwork, the specifics depending on the structure of your business. It could be a purchase order, a title to the property of the business location, or other statements highlighting the operational merit of your company.
Tax Returns: For sole proprietorships, you will need to supply both personal and business tax returns. These showcase that you declare all your income, pay taxes, and that there are no liens against the pet store.
Bank Statements: Provide these statements for as far back as possible, though it helps to supply them first least the year preceding the loan inquiry. These documents substantiate your claims in terms of revenue and cash flow. The bank statements, in conjunction with your tax returns, paints a thorough picture of your day-to-day and large-scale operations.
Revenue Statements: Especially for businesses that take payment in multiple forms (cash, debit, etc.), revenue statements supply information about the money your company is taking in before expenses. Instead of separately having to track down these transactions by cross-referencing purchase orders and bank statements, you can simplify the process by offering up a revenue statement to the potential lender.
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Additional Options to Finance Your Pet Business
Perhaps you haven’t been in business for long enough to qualify for a standard business loan. Maybe you determined that the interest rates are higher than you are willing to pay and want to investigate other options. The good news is that business loans aren’t the only financing option for your company. There are other approaches, each with a unique set of advantages for a pet store.
Business Line of Credit
A business line of credit is a form of revolving credit with an interesting set of benefits. Typically, these are offered through a major financial institution, so the business could get one through the bank it uses. The line of credit gives you a set amount of funds accessible. For example, say your pet store gets a $10,000 line of credit and uses $3,000 to pay for inventory. The pet store only pays interest on that $3,000. When it is repaid, the company regains access to the full $10,000. Another draw is that lines of credit can be used toward any expenses, ranging from staff salaries to supplies.
Business Credit Card
While most companies have a business credit card, it is usually not used as a primary alternative to a business loan. This is due to the high-interest rates and generally low credit limit. However, it is wise to have a business credit card for a couple of reasons. The pet store can use responsible payments with the card to build a good credit profile. Additionally, it can be used for incidentals and online transactions. Keep in mind that it is better to use a credit card as a backup, with another approach being the primary mode of financing.
Check out when you should you a business credit card over a business line of credit.
Merchant Cash Advance
This type of financing is unique in that it is not technically a loan. A merchant cash advance provides the pet store with money upfront, exchanged for a percentage of the store’s income. Typically, this is automatically repaid as a portion of the credit card payments received. The lender will look at the pet store’s credit card receipts to determine if they have sufficient transactions to repay the advance.
Equipment Loan
To operate, a pet store requires a fair amount of equipment. Some are smaller in size and can be purchased outright (things like heaters and kennels). Other items are larger and require a loan such as an aquarium. An equipment loan is a way for businesses to finance items used in regular business operations. Instead of using a credit card to finance these items and incurring high-interest rates, you can use an equipment loan to spread out payments over a specific time period.
Canada Small Business Financing Program (CSBFP)
This type of loan is offered through the Canadian government, offering amounts as high as one million toward business expenses, depending on how the funds are used. Up to $350,000 is available for leasehold improvements and equipment. The CSBFP is designed to incentivize and support small business growth, whether through improvements or expansion. As a pet store, you could use this to expand your services. For instance, if you function as a pet store but want to expand to in-house veterinarian services, this loan is a viable solution.
What Can You Do With Your Business Loan?
Great question! There are many other areas of your pet store that can use some financial attention. You could use your business loan to pay for expenses like:
- Pet-related products and supplies (leashes, collars, chew-toys, aquariums and cages, wood-chips, pebbles, cage and aquarium accessories, water and food dishes, beds, cat litter, travel crates, etc.)
- Pet food of all kinds
- In-house pet care and storage facilities (wall mounted containers, cages, and aquariums, floor model displays, etc.)
- Build and supply a pet grooming and cleaning station
- Hiring an account to manage your financial issues
- Compensating any employees on your payroll
- Leasing the right amount of space for your facility, or moving to a larger location
- Building one or more customer service counters
- Getting animals of all kinds from responsible, humane breeders
- Getting the proper animal pedigree certifications, business permits, and other legal licenses
- Hiring a professional veterinarian to oversee the care of your animals
- Building and supplying an in-house veterinary care clinic
- Establishing an online store for the delivery of pet-related supplies, a blog for pet care tips, advertising purposes, etc.
- Financing uniforms and safety gear for your employees
Qualifying For The Best Interest Rate
There are a few proven measures to get yourself a business loan at a competitive rate. While they require advance planning, just a few simple steps can offer substantial savings in terms of interest. The key steps include:
- Improving your credit: Take steps to increase your credit score by paying all of your installments on time and in full. If you have credit cards, be sure not to get too close to your limit, as this is included in the credit score calculations. Limit credit checks whenever possible, as even the small dings of soft credit checks can add up over time.
- Reducing debt: Credit is determined largely by your debt-to-income ratio, where the higher that metric, the lower your creditworthiness. As a result, if you want to improve your chances of getting a good rate on your business loan, pay down debt as efficiently as possible. The best approach is to first focus on loans with the highest rate of interest, then move onto more affordable debt.
- Adding collateral: If you are working with a deadline for financing, one of the fastest ways to get better terms is by including collateral. This is a method of securing the loan; so, while it can improve the terms, it isn’t without risk. If you default on the loan, the collateral can be liquidated and used to repay the amount. Collateral ranges from real estate to equipment.
- Getting a cosigner: In certain circumstances, such as having a business partner with good credit, adding a cosigner is the only extra step you need to take. However, due to the risk placed on the cosigner, this option is usually only taken when they have a vested interest in the pet store itself.
- Improving cash flow: Finally, if you want to get better loan terms, one good way to do it is bringing in more money. Whether it is through low-budget advertising, upselling, or reducing your costs, there are many ways to bring cash into the business. Consider what is working for and against you and aim to foster success by focusing on what is proven to work for your pet shop.
Pet Groomer & Pet Stores - FAQs
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