Loans for Vending Machine Businesses: How to Finance Inventory, Machines, and Growth

Vending machines have experienced a wave of innovation that has turned them into a sophisticated, 24/7 retail solution. The modern vending machine industry offers snacks and sodas, but also healthy food, gourmet coffee, tech gadgets, and even personal care items. All this diversification has helped fuel a boom as entrepreneurs looking for passive income streams or a scalable business dive into the business.

However, like any venture, a vending machine business requires capital to start and grow. Here, we explore how financing a vending machine company works and what vending machine business owners can do to scale their businesses.

In this article:

• How to find vending machine financing near me.
• The top financing options for the vending industry.
• How to improve your chances of getting approved for vending machine loans with competitive rates.

How Much Does It Cost to Start a Vending Machine Company

The startup costs to buy vending machines are relatively low compared to other types of businesses. You could get started for as little as $2,000. Costs may increase based on your inventory, location of machines, the types of machines (like snack vending machines vs. combo vending machines), but this is where financing a vending machine company comes into play. Between low startup costs and a range of business financing options, a vending machine business has low barriers to entry and potential to scale.

Types of Vending Machine Financing Options

Financing a vending machine company could be possible out of your own pocket. But if you’re looking to scale the business by buying more used vending machines or offering a more diverse inventory, there are several vending machine loans and financing plans worth exploring.

Term Loans

Term loans are the most conventional option, in which a lender pays you an upfront lump sum that you can use to address virtually any business need. You repay these loans with monthly payments based on an interest rate. Term loans are available from a variety of financial services providers and can be good for financing vending machine purchases.

Traditional lenders tend to have stricter eligibility requirements and may be more difficult for new businesses or business owners to obtain. Online lenders may be a better option for financing a vending machine company if you have no other experience in the industry. In either case, term loans can help you cover the upfront costs without putting yourself into too much debt.

SBA Loans

The U.S. Small Business Administration offers several loan programs that partially guarantee the loan, lowering the risk to both lender and borrower. SBA loans often have rigorous application processes and strict eligibility requirements, but if you have the patience to get through them, you may receive competitive rates and longer repayment terms.

There are two SBA loan programs that may be best suited to financing a vending machine company: 7(a) and Microloans. Each of these government-backed loans can provide the upfront capital for new vending machine businesses with competitive rates.

Business Lines of Credit

Whether your business is growing fast or you’re looking for a way to stay flexible when you’re just starting out, a business line of credit can be a good option. With a line of credit, you’re approved for a maximum loan amount, but you only pay interest on what you use. Since most are revolving, you can withdraw money, address business needs, and pay back what you’ve used to regain access to the full loan amount again.

Equipment Financing

One financing plan that’s particularly well-suited to financing a vending machine company is the equipment loan. Equipment financing uses the equipment itself as collateral for the loan, which can lower the interest rate and secure better terms. With equipment financing, you can secure several vending machines at once and pay for them over time, giving you the flexibility to scale your business quickly.

Working Capital Loans

Working capital loans are basically term loans, just with a shorter repayment term. These loans are designed to cover a business’s daily operational needs or help navigate cash flow shortages. They can provide flexibility to cover any operational expense in an emergency or scale up your inventory with the purpose of quickly generating revenue to repay the loan. They can support financing a vending machine purchase, restocking existing machines, and more.

How to Qualify for Vending Machine Loans

Getting any kind of business financing isn’t necessarily easy. Regardless of the type of loan you’re looking for, you’ll have to meet certain qualification criteria. Most lenders gauge your personal credit score (and business credit score, if applicable), time in business, revenue and cash flow, your business plan, and weigh your existing debt. Financing a vending machine company will require getting your business in a good enough place to make a lender comfortable approving your application.

Some tips to improve your approval chances are:

• Start small: If you're a new business owner or the company is new, consider financing just a few machines at first to lower your upfront ask until you can build up a track record.
• Keep great records: The more organized you are, the more streamlined the application process can be. Not only do organized financials make it easier for lenders to sort through your income statements, balance sheets, and tax returns, but it can instill confidence that you know what you’re doing.
• Pay down debts: Before you apply, take some time to pay down existing personal and business debts that may be hampering your credit score.
• Review credit reports: Mistakes can happen on your personal and business credit reports. Make sure to take a look at them to find any inaccuracies and dispute them, if necessary, to ensure you aren’t dealing with a lower score due to an error.
• Craft a great business plan: Your business plan is essential when discussing financing a vending machine purpose. You need to be specific about how you’ll use the funds and how a loan will contribute to your business’s growth and profitability.
• Compare lenders: Don’t settle for the first lender you see. Compare terms, interest rates, and fees from various lenders, including traditional banks, credit unions, online lenders, and equipment finance specialists.
• Consider a Co-signer: If your personal credit is weak, a co-signer with good credit can significantly improve your chances of approval.

Final Thoughts

The vending machine industry can be a great way to earn passive income without an enormous upfront lift. Nonetheless, your success will depend on smart financial management. Not only do you need to purchase the vending machines upfront, but you’ll need to continually keep them stocked, which comes with operational costs.

There are several types of financing options that can support your business, from equipment financing to secure new vending machines to working capital loans to ensure smooth day-to-day operations. By taking the time to compare lenders, create a great business plan, and build your business profile, financing a vending machine business is possible.

FAQs About Financing a Vending Machine

What is the best type of loan for a brand-new vending machine business?

SBA Microloans may be your most accessible and cost-effective loan for financing a vending machine business. SBA Microloans offer favorable terms and are more accessible than other types of loans due to their relatively low limits. You could also consider personal loans for business purposes or equipment financing to cover a vending machine purchase. However, the best solution will vary on multiple factors.

Can I get a vending machine loan with bad credit?

While challenging, it's not impossible. Focusing on building strong business and personal credit before applying may yield better terms.

How much money do I need as a down payment for equipment financing?

Typically, you can expect to put down between 10% and 20% of the equipment's cost for equipment financing. Some lenders might offer 100% financing for highly qualified borrowers, but a down payment generally reduces your overall loan cost and increases approval chances.

What is the typical repayment period for vending machine loans?

It depends on the type of loan. Equipment financing may range between 24 and 72 months, while working capital loans and short-term business loans typically have shorter terms, from 3 months to 2 years. SBA loans and conventional term loans can have longer terms, up to 10 years for equipment. Always look closely at the repayment terms when financing a vending machine purchase.

How can I use a working capital loan to benefit my vending machine business?

Working capital loans can help you manage day-to-day expenses, like purchasing inventory to restock machines, covering maintenance costs, or managing payroll. They can provide a financial cushion to generate consistent revenue by financing a vending machine's continuous operation.

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