How to Open a Vape Shop With No Money (The Basics of Vape Shop Financing & Business Loans)
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Starting a vape business plan can be daunting if you don’t know where to start.
Deciding if you’re going with your brand that you launch and nurture from scratch or choosing to go with a vapor store franchise instead is where you’re most likely to start.
Regardless:
With either option, you’ll be faced with the reality of raising money for the business venture, challenging us to think of ways of opening a vape shop with no money.
The basics point us towards applying for a loan or looking for a business partner who can help front the money.
Table Of Contents
- Vape Shop Expenses You Should Bear in Mind
- What Should a Business Loan Cover?
- Types of Business Loans
- How to Score a Business Loan for Your Vape Shop
- Financing Solutions & Alternatives for Your Vape Shop
- What is a Vape Store Franchise?
- How Much Does It Cost to Start a Vape Shop?
- Are Vape Stores Profitable?
Vape Shop Expenses You Should Bear in Mind
Before you decide to look for financial aid, first, you will need to calculate your vape shop's potential expenses. Even if these are only estimates, it's essential to understand a vape shop's monthly costs.
Calculating the expenses will tell you how much you can expect to spend. By comparing these calculations with the projected revenue, you'll be able to understand if your vape shop is profitable or not.
Keep in mind that the cost of opening a vape shop will differ between online vape shops and physical vape stores due to the nature of each business.
Key expenses for an online vape shop include:
- Equipment
- Supplies
- Rent/Store/Office/HQ
- Utilities
- Communication Expenses
- Insurance
- Licenses & Permits
- Inventory
- Regulatory Expenses
- Accounting
- Advertising
- Marketing
- Employee Salaries & Other Expenses
- Website Development & Maintenance
When you think about vape shop expenses, you’re probably limiting your thought process to include the obvious things like employee salaries, rent, inventory costs, and so forth.
There are a few services you’ll probably need to pay for that don’t seem quite that obvious. These include matters like website development, marketing research, advertising costs, and communications.
What Should a Business Loan Cover?
Only when you’re happy with the calculations to your vape shop’s expenses is when you can decide whether you need a loan or not. Depending on your savings, you’re willing to spend and how much you expect your monthly revenue to be.
Sales might help you cover some of the expenses, and the ultimate goal is for them to cover all costs. Otherwise, there’s no straightforward reason to open a new business.
But in most cases, starting a vape business takes some time to get the sales to the point where revenue is possible. So if your goal is to begin a vape business, it’s highly likely you’ll need to invest some of your own money to cover the expenses in the beginning. The alternative is to apply for loans for vape shops.
A vape shop loan should cover:
- Starting Expenses (Inventory, property, etc.)
- Day-to-Day Operations
- Projected Business Growth Costs
Starting expenses and day-to-day operations are almost obvious costs for a business loan to cover.
On the other hand:
Not so evident costs are those related to growing the business.
As any business grows, the operations costs will grow with it. In other words, you can’t expect a business to grow if there isn’t any further investment to support it.
For instance, if you have a brick & mortar vape store, you’ll probably start with a single physical location. But you’ll likely need more than one store to meet your sales goals, and a second, third, or fourth location will always bring more costs with it.
Types of Business Loans
There are different types of loans that can cover the cost of opening a vape shop. Some of the most popular loans for vape shops include:
1. Business Term Loan
The business term loan allows businesses to take loans of up to USD 500k, but the total amount will vary on your qualifications and needs.
Business term loans don’t usually require collateral, but this will ultimately depend on the entity you take the loan from. The pay-off period can be negotiated with the bank or other lender and should vary depending on your capacity to pay off the loan.
An interest rate will also be determined before you take out the loan and be negotiated depending on the size of the loan and your indebted capacity. The indebtment capacity will be defined by your business’s credit score, monthly revenue, and overall financial performance.
It is not easy to qualify for a business term loan if your vape shop’s financial capacity is small, which is the most likely scenario if you’re starting.
2. SBA Loans
Suppose you’re struggling to find a business partner with the financial backbone to support the investment or not having any luck getting a business term loan approved. In that case, your best shot is to take a loan from the Small Business Administration (SBA).
SBA loans are much more convenient for small businesses like a new vape shop because they carry lower interest rates that entrepreneurs find more attractive. The longer repayment terms and lack of a need for collateral make them an excellent option for small vape shops.
Despite all the advantages of an SBA loan, they are challenging to apply for and have a slow approval process.
3. Equipment Financing
Some of the main costs of opening a vape shop are those related to inventory and supplies.
In that is the leading financial obstacle you are finding:
An equipment financing loan makes perfect sense. Interest rates are low and are an excellent option for small vape shops that have not built up a credit score or have a bad one.
Loans can last for years, but you can also try to negotiate a repayment plan for as long as you’re using the equipment.
4. Business Line of Credit
The business line of credit is similar to a business credit card, minus the actual card and the ability to differ credit payments.
When you use a business line of credit, you'll need to pay the allotted amount before obtaining more credit. Repayment conditions depend on your vape shop's financial health, but a fair estimate would be a 6 to 12 month period of time.
A business line of credit is a good option for vape shops with no or a bad credit score because it does not consider approval.
5. Personal Loan
Personal loans are a good option for new vape shops that have not had time to build up a business credit score, which is expected when it comes to a new business.
Personal loans take into account your financial situation and can be put to use for business-oriented purposes. Combining business and personal finances is not the best option, but an alternative to consider if there isn’t any other way out.
How to Score a Business Loan for Your Vape Shop
Moneylenders will have to look at your vape shop’s financial situation before they can make a decision. This much can be assumed, but what are the key variables they will look at?
These are the financial aspects of your vape shop that should be in order before applying for a loan:
- Business credit score
- All information that portrays your financial capacity to make the payments
- Vape shop revenue
- How long has your vape shop been open for business (2-3 years is standard)
- Personal and vape shop bank statements
- Personal & vape shop tax returns
- Vape shop legal documentation
Financing Solutions & Alternatives for Your Vape Shop
Although not ideal, it is possible to face a situation where it becomes impossible to secure loans for vape shops. Which, if you need one, literally forces you to answer the question; how to open a vape shop with no money?
In that case, you’ll have to get creative.
Luckily, technology and the internet give us a wide range of options to choose from:
- Crowdfunding
- Peer-to-Peer Lending
- Online Loans
- Credit Cards
Large credit lines for a new business could be challenging to score, even with alternative financial solutions like the above.
Because of this, some people choose to pivot from starting a vape shop from scratch. A decision that adds uncertainty to the business's success and decides to open a vapor store franchise.
What is a Vape Store Franchise?
Franchises are business models that allow you to pay a fee to use the name and knowledge of other vape shops that have already done the groundwork for you. This way, the uncertainty of success and the cost of opening a vape shop are both reduced.
A vape store franchise enables you to piggy-back off a popular name instead of having to build a completely new one from the ground up. This setup generates reliability and ensures you have a built customer base before you even start. Opening a vape store franchise could make your business venture more appealing to moneylenders and banks.
Franchises also train you and your employees rather than having to learn as you go. This training usually includes all operational processes.
How Much Does It Cost to Start a Vape Shop?
The cost of opening a vape shop cannot be calculated very accurately due to the vast amount of variables. We can, however, provide a few estimates based on experience.
Starting a vape business from scratch could be anywhere around USD 25k-50k. If the decision is to go with a vapor store franchise, then the costs could come all the way down to USD 10k-20k.
Costs could fluctuate depending on location, salaries, personal taste, and many other factors that make it impossible to give an accurate estimate.
Are Vape Stores Profitable?
Like any other business, vape shops can be profitable. Otherwise, there wouldn’t be so many of them and so many new ones launching every month.
But the success of a vape store will be decided by many things that could go south, as is the situation with any retail business. Juggling expenses, securing a loan that covers all of them, and designing a successful vapor shop business plan all play a significant role in the outcome.
