How to Finance a New Vending Machine Business
There are many types of vending machine businesses. For instance, you can sell candy, snacks, toys, soft drinks, coffee and even pet supplies. Vending machine business costs vary based on products sold and equipment used. You can start a business on your own or purchase a franchise. You can establish your own leads or buy existing contacts.
- Difficulty:
- Moderate
Instructions
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1
Prepare a thorough plan that describes how the business will operate. Include revenue (e.g., weekly, monthly and annually) along with expense (products, machines, maintenance) projections. Location foot traffic will impact your projections significantly. For example, vending machines located in a high school with 400 students will generate different sales than machines in small offices with less than 20 employees or in hospitals with more than 1,000 patients per day. Consider that you might have to pay the property owner a monthly fee or commission in order to receive space for the vending machines. Decide if you will lease or buy (new or used) vending machines. Contact product suppliers to negotiate prices, such as a lower rate if you buy in bulk.
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2
Determine the total amount of financing your business will need. According to gumballs.com, one gumball machine can cost about $120, while bmigaming.com offers cold beverage machines for about $5,000. If you hire people to stock the machines, then you need to add employee costs. Compare the current amount of funding available with the amount needed. For example, your start-up vending machine business might cost $15,000 for three locations. If you have $6,000 in personal savings, then you only need $9,000 in financing. A partner might offer $5,000 in exchange for ownership in the business.
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3
Practice the presentation you will make to potential investors. Multiple financing sources exist, such as traditional banks and credit unions, family members and friends, angel investors, or the Small Business Administration (sba.gov). Your goal should be to prepare a pitch sufficiently so that you can address investor concerns and answer likely questions, such as about expected sales growth and competition. Be prepared to explain why you want to start with five machines, instead of one (e.g., perhaps you have a contract and need multiple machines).
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4
Assess financing terms and results. There is a difference between receiving a $9,000 loan with a 6-percent annual interest rate than a 14-percent interest rate, especially given that most machines sell products priced less than $3. Make counter offers, so that you receive an optimal finance package. Brainstorm different methods if you are not able to get financing. For example, you can get a personal loan or use assets as collateral.
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5
Review the business structure. Any person can establish a business as a sole proprietorship and report profits or losses through personal income tax returns. Unlike other business structures, such as limited liability companies, limited partnerships or corporations, most sole proprietors are personally liable for business debts. Therefore, if the vending machine business is sued or the financing is unpaid, creditors can seize your personal assets including real estate and cars to satisfy the business debt.
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Tips & Warnings
Provide a contact number to address malfunctioning machines.
Pick locations carefully to minimize theft and secure machines well to prevent people from breaking into the machines.
