Every single day, every time we watch TV or listen to the radio, we hear gloom and doom this and gloom and doom that! We hear how tight the credit market is. The credit market must be so tight it squeaks when it moves. It must be impossible to get a loan, especially for a grooming van.
Well, Wag’n Tails begs to differ with those opinions!
In this brief article, my intent is to enlighten you on how the “tight” credit market applies to mobile grooming van financing in general, and Wag’n Tails in particular. I’ll review our relationship with lenders, why local bank financing can be difficult to get and how used van financing is unique. Finally, I’ll provide some basic truths about mobile used grooming van financing.
Reality
The fact of the matter is our lenders are pretty much as aggressively financing our vans today as they ever have been! In other words, we are getting loans approved through our major lenders about the same today as we have in the past. They have slightly upped the standards on who qualifies for a mobile grooming van loan but they really haven’t added any major barriers to the process of our clients being granted loans.
As long as our clients have a good credit score, a reasonable debt to income ratio and a timely installment payment history (like on a house or car) they get financed on a new or used Wag’n Tails mobile grooming vehicle.
Understanding the Business
All of our finance sources understand mobile grooming. That may not sound like a big deal unless you’ve tried to go out on your own to get a grooming van financed. If you have tried it, you know what a chore it is to get a banker to grasp the basic concept of mobile pet grooming, let alone grant you a loan for one. It’s not impossible but it can be frustrating to say the least.
Local banks might be willing to grant you a loan if you’re an established business with your money in their bank and a great credit history but if you’re a start-up business it can very difficult. Most lenders just don’t understand the mobile grooming business model, and in many cases, they don’t want to learn. They tend to see the whole proposition as way too risky--especially in today’s market.
As you might guess, a large portion of Wag’n Tails clients are start-up businesses. Some are groomers fresh out of school, some are leaving a shop. Some others are adding vans to their mobile fleet or grooming shop operations. The key is they all want to be their own boss and enjoy the freedom and income that mobile grooming affords.
Why Aren’t Our Lenders Tightening Up On Us?
So why are our lenders still aggressively financing new and used Wag’n Tails for our clients? What makes us so special?
First off, our lenders get it. We have taken the time to educate our finance sources about mobile grooming so you don’t have to. Our major lenders understand mobile grooming because we have expended considerable time, effort and expense to enlighten them.
Also, Wag’n Tails has dedicated credit analysts at our lending institutions that review our financing proposals we submit to them. These analysts have not only visited our facilities, they have a clear understanding of the mobile grooming business model.
Our track record is another reason. We have been doing business with them for over 12 years. They know that our clients pay their loans on time because we work hard with them to ensure their success. They see us pass on our knowledge, skill and expertise in this business to all of our clients from the very beginning. They have seen our outstanding customer service and highest possible build quality that results in minimal downtime and thus, less income interruption in our clients businesses. These factors greatly increase our lenders comfort level.
Finally, our financing packages submitted to them are uniform and formatted to suit each lender’s application review requirements. Wag’n Tails, working closely with our client, assembles a custom tailored finance package that allows the lender to quickly and easily evaluate our client’s creditworthiness.
All of these factors help our lenders look for ways to approve a loan rather than pinpointing reasons to decline it.
Used Van Financing
Now let’s look at used vehicle financing. There is a common misconception that used vans are easier to finance than new because they cost less. This is understandable but in reality, they can be more difficult to finance and require even stronger creditworthiness for several reasons. These reasons all stem from banks having an extremely limited understanding of the market value of used grooming vans.
First, there is no “Blue Book” market value for them to reference. They look at the value of a used cargo van which is always much less than the market value of a used grooming van. They see a used cargo van book value that is worth only about 20% (or less) of the loan amount you’re requesting. Strike one.
Next, you explain that it is a specialty commercial vehicle and they realize they have no way to assign a value to it. Strike two.
Finally, because it is used, they expect wear and tear issues, in some cases no factory warranty and they assume less dependability. That gives them the perception of a higher likelihood of interruptions in income the van can produce. They perceive this as even more risk. Strike three.
Our experience has demonstrated that used van financing usually carries larger down payments, higher interest rates and shorter repayment terms because of the higher perceived risk in the lender’s eyes. That usually boils down to a monthly payment amount on a used van that is only a few grooms per month less than a new van.
Facts to consider:
- Keep track of your credit score--monitor it at least annually. Go to annualcreditreport.com or call 877-322-8228 to make this happen.
- A loan for a new or used grooming van is not a consumer loan like when you buy a Ford Focus. It’s a business loan based on the prime lending rate.
- A grooming van is not a Chevy Tahoe. It’s a specialized commercial vehicle so there is no “Blue Book” value so the loan is inherently riskier to a bank when compared to that Tahoe.
- Consideration should be given to a home equity loan because you may be able to get a good rate and you can usually do whatever you want to do with the money.
- When talking to local banks and credit unions, be sure they understand that it is a specialized commercial vehicle up front. Be sure to ask if they make commercial loans so you don’t surprise them, or get surprised yourself later.
- If you are an established business, always deposit all of your income. If you pocket the cash, your revenue history will be understated and that’s what the banks will see when reviewing you for your next van(s).
- Selecting the lender is critically important because you’ll be married to them for the term of your loan. Choose wisely to avoid headaches down the road (pun intended-sorry).
- Used vans older than 5 model years are nearly impossible to finance so you can expect to pay cash.
Summary
I hope you now have a clearer picture of the “business as usual” credit market our clients experience every day here at Wag’n Tails. Also, you should have a good understanding of our relationship with our lenders and how we have educated them on our business model. You can see why most local banks shy away from the idea of mobile grooming lending in general. Finally, I hope you understand why used financing can be more difficult to get than new and I left you with some helpful hints when you start thinking of purchasing a new or used grooming van.
If you have any questions or comments, feel free to contact me at 800-513-0304 or email me at anytime at john@wagntails.com. All of us here at Wag’n Tails are always happy to help in any way we can.
