Pet Store Financing & Loans

As with most small businesses, if you are looking to open your own pet store, it is likely that you will need some form of financing to help you get started and keep you afloat until you build up your loyal customer base.  

How to start a pet store business?

Even just thinking about starting a pet store business can be a little overwhelming so it is important that you know what steps to take before you even look at obtaining pet store financing.

Create a Solid Business Plan

Having a solid business plan is essential for any startup business, both to keep you on track and as something you can present to potential lenders when applying for funding. Your business plan needs to include:

• an outline of the purpose of your business
• your business goals
• what steps you plan to take to achieve success
• your target audience
• your expected profit margins
• potential suppliers and/or vendors
• approximate prices you will charge for your goods

Your business plan is one of the first things that will be considered by potential loan lenders, so you need to ensure that it provides as much detail as possible relevant to the success of your pet store.

Research Laws

It is important that you know the laws regarding the sale of pets, both within your state and in your local area. Most cities require pet stores to hold a license and they must be periodically inspected against health and safety regulations.

Be aware that these laws are often being changes, so you should ensure that you keep up to date with the laws for your area. 

Location

Selecting a good location is totally up to you, but it is best to choose somewhere that is easily accessible, by both owners and their pets, and somewhere with good exposure to pet owners, such as near a dog park or veterinary clinic.

Register Your Business

After choosing a name for your pet store, you need to hire an attorney to help you set up your business structure and ensure that all legal requirements are met before opening. Your business structure determines how your business is registered with governments, e.g. whether it is a sole proprietorship, partnership, or a limited liability company (LLC).

Licenses and Tax

You then need to ensure that you acquire the relevant legal documents from your city government, state government, and the federal government, including your pet store license. You will also need to obtain a Tax ID number or EIN from the IRS to register for state taxes.

Hire an Accountant

Unless you have the correct knowledge to handle the accounts yourself, hiring an accountant to balance your finances and help you to pay your taxes is particularly beneficial.

Obtain Your Equipment

Once you have acquired your pet storefront, you can obtain the equipment you will need to care for and house any of the pets you are looking to sell. This includes purchasing cages, enclosures, and aquariums of a comfortable size, as well as the items you will need to keep the pets fed and watered. Only after this has been set up can you purchase your livestock from a reputable dealer or breeder. It is vital that you check health credentials on every single animal you purchase.

What are the reasons pet stores need financing?

Like any small business, pet stores often need financing to help them on their way to success. The reasons for this include:

• purchasing inventory, especially specialist products that are often more expensive
• seasonal expenses
• payroll expenses
• business expansion
• new, specialist equipment, e.g. grooming station
• marketing and advertising

How much does it cost to open a pet store?

As you can probably imagine, opening a pet store can be an expensive venture, particularly as you need to make sure that you are fully stocked with products for every type of pet from the word go. Thankfully, as a pet store owner, you are able to buy wholesale as opposed to raw materials which will cost you less to obtain your stock.

Initial startup costs for a pet store varies depending on the type of store you own. If you are reselling products, you should only need somewhere between $15,000 and $30,000 in order to get your store started. If, on the other hand, you are manufacturing products yourself, startup costs can fall anywhere between $30,000 and $500,000.

In terms of rent and utility costs, you will typically need to pay around $1.20 per square foot for retail space situated in a wealthy area, with startup utility costs of $300, and monthly utility costs of $300 to $500.

 

On top of that, you will need to set aside around $3,500 for display cases, shelves, and check-out counter.

Starting an online pet store can help cut down costs or balance the cost of your retail store, as does searching for used equipment. You can seriously cut costs if you’re willing to purchase used where possible.

What types of loans can I get for a pet store?

If these costs are too high for you to be able to afford using your own finances, there are options for pet store financing available to you:

Bank Loans

Although bank loans offer the lowest rates (starting as low as 5%) with the longest terms (ranging from 5 to 20 years), they are very difficult to obtain, and the funding period can be particularly long. There are a lot of specific requirements that you must meet in order to acquire a bank loan and, if you are lucky enough to be approved, you are likely to have to wait anywhere between 2 weeks and 1 month to receive your funding, in some cases even as much as 3 months.

SBA Loans

SBA loans are the most sought-after type of financing for every small business owner because the government guarantees 85-90% of the total loan amount, posing less risk to lenders. However, because of this popularity SBA loans are also particularly hard to qualify for, often needing borrowers to supply potential lenders with extensive documentation to prove that they are worthy of a loan.

SBA loans also have low-interest rates, ranging from around 6-10%, with terms ranging from 3 to 7 years, and you can receive funding in about 10 days.

Alternative Financing

With alternative financing, such as mid-prime financing and institutional lenders, borrowers can obtain funding with more affordable rates, even with a less than desirable credit score. Rates are higher than other financing options, ranging from 6% to 25%, but you are much more likely to be approved quickly and receive funding within just 1 week for terms of 1-5 years.

Asset-Based Financing

By using commercial or personal assets as collateral, an asset-based lender can provide a borrower with financing even if you have bad credit or little cash-flow. This type of financing includes inventory financing, invoice financing, as well as others. The funding process is usually completed within 3 weeks, but you should be aware of high-interest rates ranging from 8% to 25%.

Merchant Cash Advance

This type of funding can provide you with cash fast, even with a bad credit score, of amounts ranging from $5,000 to $2,000,000. This is where your business sells future business revenue in exchange for an upfront sum from a lender. Approval can take just hours and you can receive funding in less than 5 days. However, this financing offers the highest rates and is advisable to be used only as a last resort.

Will I need to finance equipment for a pet store?

Purchasing equipment can be one of the largest costs when opening a pet store so it is likely that you won’t be able to afford the costs upfront. This is where Equipment Financing comes in.

An Equipment Financing Company will pay for the equipment you need for your business and you pay them back with interest over a set term. The best part is, the equipment itself is used as collateral so that if you default on repayments the Equipment Financing Company will simply take back and liquidate the equipment to get back the money they were owed.

Is owning a pet store profitable?

Owning a pet store can be profitable, especially if you are able to fulfill a niche need in your area. Once you have built up a solid customer base, those customers will return at least every few weeks to restock on items like pet food and bedding, so you can build a rapport and sell more of what they need.

How much do pet shop owners make on average?

Bob Vetere, the COO of the American Pet Products Association, states that each employee in a pet store makes around $135,200 per year in sales, with 44.5% being put towards inventory purchases and 19% going towards salaries and benefits. Therefore, an average-sized pet store can achieve an average net income of $30,000 per year.

Is the pet industry growing?

Yes, the pet industry is growing. This is mainly due to generational trends. For example, Baby Boomers and Generation X have led to a growth in pet ownership, possibly due to their children leaving home, and as Millennials become pet owners it is apparent that they are willing to spend more money on quality products for their pets than the generations before them.

What pet products sell best for pet stores?

Most of a pet store’s revenue comes from the sale of pet food, followed by items such as toys and beds that wear out in time or bedding that needs to be changed regularly to keep pet homes clean.

How do you apply for pet store financing?

How you apply for pet store financing depends on the financing option you choose to go with. Using an online loan lender makes it easier for you to compare terms and interest rates as well as the reliability of the lenders themselves to ensure that you are getting the right deal for you and your pet store business.

PrimeRates will save you time when you are looking for a loan by finding you the best possible offers, no matter which type of loan you want to apply for. Our pre-qualification application will only take you minutes to fill out, then you simply select the loan offer that best suits you, depending on the monthly payment amount, interest rates, and loan amount. Better yet, it won’t affect your credit score. If you’re looking for Pet Store Financing, don’t hesitate to get started with PrimeRates.