How to Finance Your Vending Machine Business

If just one quality vending machine is going to cost you $600 to $5000, it becomes clear pretty fast that while vending is one of the cheaper businesses to get into, it is definitely not free.

Let's say you want to start off the 5 top of the line vending machines that cost $2500 each. That's $12,500 -- not chump change. If you've only got $2500 saved, what are your options?

There are financing companies that specialize in funding vending machine businesses, or if they don't specialize in it, they've at least been doing vending machine business funding for quite some time.

1) Paramount Financial (www.paramountfinance.com) can lend you $3000 and up. They can do credit approvals in 24 hours and have an online application.



2) Firestone Financial. (www.firestonefinancial.com)
They have a $39 application fee and do financing for up to 60 months. There's an online application. They are good enough to make the Inc 5000 Honoree list and have been in business 39 years. Call them at or email them at lyaffe@firestonefinancial.com

3) Direct Capitol Corporation (directcapital.com) has some 0% financing deals if you've got the credit score. They also have some pretty great deals on equipment from lenders that have defaulted on their contracts, so if you're trying to keep your borrowing to a minimum (always an excellent, excellent idea), this company might be a great opportunity for getting some nice vending machines for less than you were expecting to pay.

Depending on your credit, the interest rate you're offered may or may not work for you. Keep in mind that to make a profit you'll have to cover your interest payments, the product of whatever you're vending, and pay taxes before you see a nickle of profit. And that's if you do not pay yourself a salary, which is common among startups, but a really, really bad business practice. If you laugh at the idea of being able to pay yourself and still make a profit doing this, vending may not be right for you. Even if you're just starting out, you really ought to be paying yourself at least $10 an hour and making a profit, or this business has become a liability instead of an asset.

Also, be very, very careful about the terms of your loan. Some business loans have clauses that if you are EVER late on one payment, your interest rate goes up to, say, 24% retroactively. The retroactively part is the doozy, because it means what you owe the lender will now be 24% from the loan origination date. So if you've had the loan two years, and you're late on a payment, you now own that lender 24% interest from two years back. When this happens it is not uncommon to owe 2-3 times as much interest as principal (principal is the original amount of money you borrowed). So be really careful.

One way to cut your financing costs is to go interest free. That may mean shopping around for a good zero interest deal, or it could mean a visit to your family or a well-off friend. I bring this up because it is a classic way to finance a new business, but frankly, in my experience these kinds of loans end up being the devil. Even if you pay the loan back, on time, it creates tension and muddies the waters. I recommend you wait 2-3 months to buy your vending machines, and go get a part time job now and save up for your new equipment. Flipping hamburgers can end up being way better than paying penalty interest rates or avoiding your mother because you owe her money.

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