Vending machine business finance
A vending machine can pay itself off in less than 1-2 years with the right location and inventory.
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A vending machine business can seem like a lucrative business opportunity, offering a hands-free business model with low entry costs and the ability to scale over time. But is a vending machine business as easy to run – and profit from – as it may seem?
Read on to find out more about running a vending machine business, and finance options to consider to get you started.
Why consider a vending machine business?
On average vending machines can cost between $6000 and $9000 to purchase and can generate returns of $100 to $400 per week.
Despite COVID-19, vending machines are still a big business. Increasingly more drink and snack dispensing machines are popping up in areas where people are forced to wait, and niche machines are created all the time, selling umbrellas, hot snacks, batteries and even face masks and hand sanitiser.
The advantages and disadvantages of a vending machine business
How do the pros and cons stack up when considering running your own vending machines?
Consider the following when determining if this kind of business model is right for you:
Advantages
- Low start-up costs. Compared with many other business start-up ideas, a vending machine business is relatively inexpensive to start. New machines can cost between $2,000 and $10,000 to purchase outright, and there are few other start-up costs associated with a vending machine business. With no office or retail space to rent and low stock levels, a vending machine business can be an inexpensive way to fund and run your own business.
- Easy to scale. While each vending machine may only bring in a small profit each week, the trick to building a profitable business is to run a small number of machines initially while you're learning the ropes and understanding how the business works. As your skills improve and your existing machines start to become profitable, you can begin to scale your business, buying one or two new machines at a time.
- Low ongoing expenses. When you're first starting out with a handful of machines, you'll be able to restock and maintain the machines yourself. As your business continues to grow and you take on new machines, you may decide to hire someone to help you restock and maintain while you continue planning for future machines and negotiating new locations. Even with a staff member (or two) on board, the ongoing expenses associated with a vending machine business are minimal compared with other business types.
Disadvantages
- Difficult to negotiate locations. Location is key when it comes to vending machine success. You may think of public areas like train stations as being the best location for a vending machine, but it is usually private areas like shared office kitchens and hospital cafeterias that house some of the most profitable vending machines. Existing vending machine business owners tend to already have a firm foothold in these lucrative positions, and it can be difficult to secure a prime location.
- Not a set-and-forget business. While it may seem like vending machines simply need to be installed and then left to make money, it's not quite that simple. You'll need a keen business sense and excellent negotiating skills to get your machines in good positions.
- Highly competitive. The vending machine industry is a highly competitive one, and it can be difficult for newcomers to find a foothold in a well-established market. If this is a concern, consider purchasing an existing business that already has vending machines in prime locations. Otherwise, be prepared to use your negotiation skills and put in the time and effort required to establish yourself in what can be an already saturated market.
- Maintenance and refilling. While vending machines can do a lot of the work themselves – taking orders and giving change without human help – you will still need to regularly attend to your machines. Machines usually need refilling at least once a week (more often for machines in prime locations) and you will need to be on-call to fix broken machines as soon as possible. After all, for every hour that one of your machines is out of action, you're missing out on profits. The more machines you run, the less likely it will be that you'll be able to restock and maintain the machines on your own.
How to find finance for a vending machine business
Think you've got what it takes to run a successful vending machine business? If you've weighed up the pros and cons and understand that there is a serious business side to what could appear to be a set-and-forget business plan, it's time to find a way to fund your new business venture.
Consider the following options for vending machine business finance:
Unsecured business loan
While Australia's big banks are unlikely to offer an unsecured business loan for a vending machine business, there are plenty of smaller, independent lenders that will consider unsecured loans for Australian small businesses. If you're not keen on the idea of offering your home or business assets as security for the loan – or you don't have suitable assets to use as security – an unsecured business loan could be a viable option. You will likely pay a higher interest rate than for a secured business loan, to mitigate the additional risk to the lender.
Secured business loan
If you're happy to offer your residential property or other suitable business or personal assets as security, you can take advantage of interest rate discounts and more favourable loan terms with a secured business loan. A business loan secured by suitably valued residential property can attract interest rates similar to a home loan mortgage and can attract loan terms of up to 30 years.
Franchise loan
When you're first starting out in a vending machine business, you'll need to decide whether to join a franchise program or start out on your own. If you decide that franchising is the way to go, you could be eligible for a franchise loan. No assets are required as security for a franchise loan, with the loan term and amount secured by the franchise itself. Successful applicants can enjoy the interest rate discounts of a secured business loan without putting up their own assets as security. The term of a franchise loan is usually capped at the initial length of the franchise agreement, which is unlikely to be longer than five years.
Personal loan
Many lenders will only offer business loan products to established businesses, making it difficult for people just starting out in business to get finance. A personal loan can be a good option to fund costs associated with starting or maintaining a new business. As with business loans, you can avail secured personal loans, with interest rate discounts and favourable loan terms if you have an asset to offer as security for the loan.
Business loans to compare
Frequently asked questions
Where can I buy vending machines?
Vending machines can be purchased new or second-hand. New machines will usually come with a warranty period and will be less likely to break down or need extensive repairs in their first few years, while second-hand machines will be cheaper to purchase upfront but may need more frequent repairs and maintenance. Vending machine manufacturers will often include second-hand machine listings on their websites, while others are sold privately on community websites like Gumtree, eBay and Craigslist.
How can I apply for funding?
The first step is to decide which loan type would best suit your needs. Do you already run an established Australian business? A business loan could be the best choice. If not, are you interested in starting a vending machine franchise business? You may qualify for a franchise loan. Otherwise, a personal loan may be the best finance solution. Once you've decided, click on the loan type above to compare your options and find out the full application process.
Which product brands can I sell in my vending machines?
Much of the success of a vending machine comes down to two factors – its location, and the products sold. Beware of vending machines that sell no-name products, as customers may be unlikely to take a risk on an unknown brand at the point of sale. Remember, the machine itself is solely responsible for selling the products – you won't be there to make a sales pitch. Similarly, be mindful when purchasing vending machines bearing brand names such as Coca-Cola, and ask to see proof from the seller that the brand name is being used with permission and that you are legally allowed to sell licensed products in the machine.
Picture: Shutterstock
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