Financing for Vending and Arcade Machines

Published August 15, 2018 by Sarah Pritzker

Vending machines and amusements arcades are big business in the US today, averaging $7 billion a year. Whether you’re looking for a side job to bring in some extra income, or want to add canteen vending for the benefit of your employees, vending and amusements machines can be a sensible business decision.

Your income will be mostly in cash, without any need to wait for accounts payable to be processed. As soon as your vending or arcade machine is set up and stocked, it will start bringing in revenue. What’s more, vending machines cover a huge range of product options, from snacks and canned drinks to hygiene products and retail items, so you don’t have any restrictions on what you can sell from a vending machine. If you’re interested in getting a vending or amusements machine, chances are good that you’ll need some way to finance your new venture. Here is a full guide to finding financing for vending and arcade machines.

How Much Does it Cost to Start a Vending Machine Business?

Before you can get financing for your vending machine or arcade games, you need to know how much money you need. It’s important to consider all of these startup costs:

  • The cost of your vending cart or arcade. This is likely to take up the majority of your funds.
    • Bulk machines like a gumball machine are not very expensive. You can expect to pay between $50 to $200 for a bulk candy machine, although the profits are nowhere near as high as with a more advanced vending machine.
    • Mechanical vending machines like a coke machine cost more. You’ll have to pay anything from $1,000 to $3,000 for a refurbished, used vending machine, or $3,000 and up for a new one, depending on how technologically advanced they are.
    • If you want an electronic vending machine that can take credit card payments as well as cash, you’ll probably need to pay $3,000+ per machine.
    • Arcade machines are far more costly. You’ll need to spend at least $3,000 and up to $20,000 for a new arcade game.
  • Your vending machine products. This will vary depending on the wholesale cost of your items.
  • Insurance for your machines. It’s wise to insure every vending machine, just in case of vandalism, technical error, or accident.

Don’t forget to factor in your ongoing costs, especially if you need to work out how long it will take for your pay off your arcade or vending machine. Ongoing costs include:

  • Restocking with more products
  • Regular cleaning, maintenance, and repairs – if you can’t do this yourself, you’ll need to pay a handyman to do it for you
  • Electricity to run your machine
  • Commission – unless you’re installing a vending machine in your own business, you’ll need to pay commission to the owner of the location; this is usually around 10% - 25% of sales

What Types of Financing Can I Get for Vending and Arcade Machines?

If you’re just adding a gumball machine or two to your existing business, you might not need any additional financing. These candy machines usually don’t cost much to run, the candy itself is inexpensive, and the mechanical machines don’t break down easily. However, if you’re planning to buy arcade machines or a more expensive vending machine, you’ll probably need some financing help.

It's recommended to start with at least 2 or 3 machines if you want your vending machine business to turn a decent profit. Eventually, you’ll probably hope to scale up to 10 or more, so solid, affordable vending machine business financing is a must. Even if you could afford to buy your equipment yourself, it’s better to save your working capital for ongoing costs instead of tying it up in equipment.

Here are some types of financing you could turn to for your vending machine or amusements equipment.

Credit Cards

If you have good credit score, you could use credit cards for vending machine financing. It’s easy and quick to extend your existing credit limit, so you don’t need to wait to buy your machines. However, credit card rates are typically higher than other forms of financing. Using up your credit allowance on equipment can also leave you without a safety net in case of emergencies.

  • Average APR: 13% to 19%
  • Loan process: Approval can take just minutes online
  • Minimum credit score: 700+ for the best rates
  • Term: Monthly billing
Business Loans

Short- or long-term business loans can keep your vending machine purchase on a professional footing. APR rates are much lower than credit card rates, although they vary depending on your circumstances. Because this is a business loan, your personal credit rating is less important than your business' average revenue history and business credit standing. If you apply for a business loan, you'll usually be required to show that you've been in business for a requisite minimum length of time – typically, at least 2 years.

You can get business loans from your bank, a credit union, or an online lender. However, many lenders view vending machine loans as risky prospects, so you might find it hard to get a business loan for vending or arcade machines.

  • Average APR: 4% to 6%
  • Loan process: Can take just a few days through online lenders, or a few weeks through a brick and mortar bank
  • Minimum credit score: 600, but the higher, the better
  • Term: 3-18 months for a short-term loan, 1-5 years for a long-term loan
SBA loans

SBA loans are backed by the government, which means that if you default, the lender is only responsible for around 15% of the loan amount. This makes lenders much more willing to take the risk of making the loan.

SBA 7(a) loans cover working capital and equipment leasing for ventures such as vending machines. APR rates are typically lower than regular business loans, but it can take a long time for the loan to be approved and processed, and you’ll need a good credit rating and a minimum down payment of 10% - 20% of the total loan amount to qualify.

  • Average APR: 7.25% to 11.5%
  • Loan process: Up to 90 days
  • Minimum credit score: 680
  • Term: 25 years
Personal Loans

If you have good credit standing and a low existing debt burden, you might want to use a personal loan to fund your soda machine or other amusements equipment. This is an especially good option if you don’t have an existing business.

Personal loan terms can be as short as a few weeks or as long as a few years, and you can apply in minutes with online lenders.

  • Average APR: 4% to 32%
  • Loan process: As little as a few hours
  • Minimum credit score: 680+
  • Term: 3 months to 10 years
HELOC

If you have a sufficient amount of equity in your home, a Home Equity Line of Credit, or HELOC could be one solution. A HELOC is a flexible credit line that's secured against your home, usually with a term of around 10 years.

HELOC rates are usually lower than credit card rates, your credit score is less important than your home equity, and you’ll only pay interest on the amount you withdraw, not on the maximum amount you’re approved to borrow. However, you risk losing your home if you can’t repay the loan. HELOCs also take a while to process, since the lender needs to do a home valuation, and you’ll need to pay closing costs on the loan.

  • Average APR: 3.24% to 5%
  • Loan process: 30-45 days
  • Minimum credit score: Low
  • Term: 10 years
Borrowing from Friends or Family

If you have friends or family members who want to help you out or partner with you, you could have an easy source of low-cost financing. Friend or family loans usually come with low or no interest rates, and you wouldn't need to wait long for the funds to come through. The danger is that if your business doesn't succeed, you could ruin your relationship.

Equipment Financing Loans

Some finance companies and vending or arcade machine companies offer equipment financing loans. These are loans designed specifically to cover your equipment leasing or purchase costs.

Depending on your financial situation, you could get funding in as little as a few days, and rates are similar to other business loans.

  • Average APR: 5% to 25%
  • Loan process: A few days
  • Minimum credit score: 640+
  • Term: 12-72 months
Vending Machine Leasing

You can get vending or arcade machine leasing deals from finance companies or canteen vending or arcade machine retailers. These deals usually require an initial down payment and regular monthly payments. Most leasing deals allow you to choose to buy out your equipment at the end of the term or trade it in for a new model.

Vending or arcade machine leasing allows you the flexibility to upgrade your equipment whenever you’d like, saves your working capital for other areas of your business, and enables you to deduct tax from your payments each year. Your lease payments also make your balance sheets look better since they are considered a monthly business expense instead of a liability. However, you risk paying more than the machine is worth across the lifetime of the loan.

  • Average APR: 8% to 25%
  • Loan process: As little as one day
  • Minimum credit score: The higher, the better
  • Term: 1-7 years

Where to Find Vending Machine Financing

Whether you’re planning to lease or purchase your vending and arcade machines, you have a few places to turn for amusements equipment financing.

Banks

Your bank is probably your first port of call, but when it comes to vending machines and arcade games, it’s not always the best choice. Banks tend to be quite nervous about items such as soda machines since they are not fixed assets. They can also be wary of lending to amusement businesses and arcades.

However, if you can get a bank to agree to make a business loan, you'll get the best interest rates and the reassurance of a fixed repayments schedule. If you qualify for an SBA loan, you'll find that banks are more likely to agree to fund it than a traditional business loan. It can take a few weeks for your application to be processed by a bank, and you'll need a good credit score and positive customer history to be approved.

Online Lenders

Online lenders challenge banks when it comes to equipment financing. It’s usually easier to qualify for a loan with an online lender, and your loan approval time is likely to be a lot shorter. Sometimes your loan can be approved and processed on the same day. Many online lenders also provide SBA loans. However, when it comes to business loans, online lenders often have higher interest rates than banks.

Peer-to-Peer Lenders

With peer-to-peer lending, you’ll get the chance to explain why you are a safe borrower and overcome any nervousness about lending for vending machines. Borrowers with lower credit scores are also more likely to succeed in getting a loan from peer-to-peer lenders than from other sources.

Peer-to-peer loans can be processed and approved in just a couple of days, but APR rates tend to be higher than through traditional lenders.

Vending or Arcade Machine Companies

Once you find the vending or arcade machines that you like, you can usually access a leasing deal through the machine vendor itself. The advantages are that you’ll be dealing with people who understand your business, and are handling both the financing and leasing aspects at the same time.

Additionally, when you lease your canteen vending machine, you can upgrade it whenever you’d like for a relatively small extra charge. This is especially important for arcade machines since the technology and game experience change frequently. If you buy an expensive machine outright, you could find yourself having to replace it after just a couple of years.

Vendors

One of the fastest ways to get an entire vending machine business up and running is to buy a franchise from a vendor. Companies that sell snacks, soft drinks, or healthy food frequently offer a franchise option, where you’ll be given use of a machine in exchange for a contract that requires you to buy all of your products from their company.

You’ll need to pay an initial franchise charge, as well as a monthly fee or percentage of your income, but there’ll be no interest payments. You’ll probably find that you’re paying a higher rate for the products than if you buy them wholesale, and you’ll have to rely on the vendor to respond to repairs and maintenance requests.

How to Get Vending Machine Financing

The requirements for vending machine leasing or a loan for coke machine or amusements machine purchase will be different depending on which lender you approach. That said, there are some questions you are always likely to be asked:

  • Credit score. No matter what type of business or personal loan you apply for, the better your credit score, the better the rates are that you’ll get. If you’re applying for a business loan, your business credit score will be just as important as your personal credit rating.
  • Number of years in business. If you want any type of business loan or leasing agreement, you’ll usually need to show that your business has been going for at least 2 years.
  • If you’re getting a HELOC, you’ll need good equity in your home.
  • A clear and well-thought-out business plan, which shows your expected profit and income.
  • Your existing debt burden, including credit card debt, business loans, student loans, and mortgage.

Where to Buy Vending and Amusements Equipment

If you’re looking to lease or purchase vending or arcade machines, there are a few places for you to turn.

  • Lease your vending machine or arcade machine from a vending or arcade machine company
  • Buy new or used vending machines direct from the manufacturer, or on marketplaces like eBay or Amazon
  • Look for a refurbished, used vending machine or arcade machine on Craigslist, eBay, or dedicated vending machine sites like UsedVending.com
  • Search for a local, reliable vending machine dealer
  • Find a vending machine franchise
  • Look for a vending machine route owner who wants to sell his equipment and his route so that you can take over an existing set of machine and locations
  • Enter an agreement with a vendor who provides you with a machine in exchange for a contract to buy your products directly from the vendor

Now that you know all the details about getting hold of financing for your vending machine or arcade or amusements machine, you’re ready to make your move. Apply now for the best rate in vending machine financing.

Sarah Pritzker
About Sarah Pritzker
Sarah Pritzker is a professional writer who specializes in financial markets and trends in the U.S. She grew up in Virginia, went to university in Boston, lived in New York City, circumnavigated the globe with stops in San Francisco, Hong Kong, Thailand, Laos, Cambodia, Kenya, Uganda, and Israel, and then eventually settled in Israel, where she currently resides.

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