Few businesses have quite the same relationship with their equipment as laundromats. Essentially, your equipment is almost the entire draw of your business. Customers will be regularly paying you to directly utilize your equipment, so it goes without saying that you want to spend a lot of time thinking about your equipment purchases.
If you’re thinking about starting your own laundromat and want to get a sense of how much the equipment will cost, where to buy it, and how to finance it, you’ve come to the right place. Read on for more information.
The Equipment You Need To Start A Laundromat (& How Much It Costs)
If you’ve been to a laundromat, you probably have a general idea of what types of equipment you’ll need to get your laundromat up and running. Nevertheless, let’s lay them all out to make sure we’re on the same page. You’ll need, at a minimum:
Commercial washers ($700 – $25,000 each)
Commercial dryers ($1,000 – $20,000 each)
A payment system
Coin-based ($100 – $200 per machine, $700-$1,200 per bill-to-coin changer)
Card-reader system ($40,000 – $80,000)
Water heating system ($15,000 – $40,000)
You’ll probably want:
Tables for folding ($60 – $600/each)
Seating ($30 and up/each)
Laundry carts ($50 – $80/each)
Vending machines for snacks/detergent ($1,000 – $5,000/each)
Entertainment (variable)
Commercial Washers
This is the reason your customers will come! Commercial washers come in a number of different sizes, with capacity ranging from 1.7 cubic feet to over 4.5 cubic feet. Many laundromats provide different sizes for different loads, charging more for use of the larger machines. In general, top-loaders are cheaper than side-loaders but are less energy and water-efficient. Even so, there’s a pretty enormous range of prices for washing units. For any given model, you want to take into account the long-term costs of the machine in terms of both utilities and maintenance. If you’re aren’t hunting for the absolute cheapest or most expensive models, you can probably expect to pay somewhere between $1,000 and $3,000 per unit.
Commercial Dryer
Most customers who use laundromats will also want to dry their clothes on site. Dryers can be heated by electricity or gas, but the majority of new laundromats will probably opt for electric (typically 240 volts) unless they already have a convenient infrastructure for gas. If you’re short on floor space, you may want to consider stackable dryers, which allow you to double the number of units you can fit within your shop. Expect to pay a bit more for the privilege, however.
Dryers generally have a larger capacity than washers, ranging from 5.5 to over 9 cubic feet, as more space is needed to effectively dry the same amount of clothes. Like washers, you can probably find decent units for between $1,000 to $3,000 each.
A Payment System
Coin-Op
The once-ubiquitous coin-operated laundry is a rarer sight than it used to be, but it’s still a viable option for laundromats looking to minimize startup costs. The coin boxes, feeder slides, and wiring add a small amount of expense to each machine. You’ll also need to spring for a bill-to-coin changer or two to ensure that your customers have quarters to feed your machines.
The downsides of a coin-based system come into play down the road. While you won’t exactly be a bank, you’ll have a lot more cash onsite, which means you’ll have more security risks than you would with a card-based system. Those risks can add expense–collecting the coins, transporting them, etc.
Card-Based
A card-based system, on the other hand, offers a lot of long-term conveniences. You won’t have to worry about collecting or keeping track of coins, and your customers won’t have to worry about having cash on hand when they walk in. Even better, these systems make it easier to track your sales. Additionally, they can function a bit like loyalty cards, encouraging customers to come back and spend down the value on their cards. Some systems also allow you to offer perks like dryer credits.
The downside, of course, is that these systems are pricey to install, adding upwards of $40K to your startup expenses. If you can afford it, though, the general consensus seems to be that they’re worth it.
Water Heating System
If you’re offering warm and hot wash cycles, you’ll need a heating system for all that water you’ll be using. These systems come with or without a storage tank. The advantage of the former is that it keeps hot water at the ready for use, but utilizes more energy to do so. Either way, you’ll want to make sure your system is powerful enough to produce enough hot water for all your machines should they run at once. With a tank storage system, you’ll want to consider its recovery rate to make sure it can meet peak demand, whereas with a tankless system your concern should be with the amount of hot water it can produce on demand.
The Rest
While not necessary per se, there are some other items that will improve your customers’ laundromat experience and help you stand out from the competition.
First, there’s the stuff that helps customers take care of their laundry. I’m talking about carts that make it easier to move wet laundry to dryers, and dry laundry to tables for folding. And speaking of tables, you’ll probably want those too. How about seating for customers who are waiting for their laundry to finish? And maybe a way to buy detergent, fabric softener, or dryer sheets if they didn’t bring their own?
Vending machines are a common sight in laundromats, and for good reason. Your busy, captive clientele are likely to get thirsty or peckish. It’s not unusual for such machines to be a significant source of revenue for laundromats. Vending machine prices vary quite a bit depending on the model and whether you buy new or used, but you’re probably looking at an outlay between $1,000 and $5,000 each.
The final consideration is entertainment. Let’s face it, doing your laundry isn’t the most exciting thing in the world. Sure, many customers have smartphones, but maybe they’d be more comfortable watching TV! How about some toys to occupy kids? And who doesn’t associate laundromats with old-fashioned coin-operated arcade games? While none of these are necessary, they can be difference-makers when people are choosing where to do their laundry.
Where To Purchase Laundromat Equipment
You can purchase laundromat equipment through a number of different sources. The option that’s best for you will likely depend on your budget, your location, and your business plan.
Distributors
Laundromats are such a common business there are actually quite a few companies that exist primarily to service them. These distributors specialize in selling, servicing, and installing laundry equipment. They also usually deal in parts, which can be useful if you’re trying to keep older machines running. If you decide to use a distributor, make sure they have a good reputation and work with the brands you want to use. If you’re looking to keep costs really low, many distributors also deal in used equipment.
Manufacturers
You can also try to buy your equipment directly from the manufacturer. While many brands still work with local distributors to sell their products, some also offer their own financing programs to help customers buy their products. Coincidentally, if you know the brand of equipment you want, you can often use a manufacturer’s website to find distributors in your area.
Franchising
While they aren’t nationally known like some other industries, there are a number of laundromat franchises operating in the US. Plugging into a franchise usually raises your starting costs. You’ll have to pay a franchise fee upfront, conform to franchise standards, and may have to pay royalties every month. In exchange, you benefit from the franchise’s advertising and supply chains. Keep in mind, a franchise will most likely lock you into specific brands and layouts.
Retail
You can, of course, buy equipment from retailers, but unless you’re taking advantage of a great sale or can come to some kind of bulk buying/financing agreement, this probably won’t be the best way to purchase the majority of your laundromat equipment. It may, however, make sense to buy some of your smaller one-off purchases this way.
Laundromat Equipment Financing Options
By now, you’re probably realizing that equipment makes up a lot of the cost of starting a laundromat, with total costs for an average-sized laundromat ranging between $200K – $500K. If you don’t have that much money lying around under your mattress, you’ll need to seek other sources of financing.
Leasing
If you have decent credit (620+) and would rather have monthly payments rather than a large initial expense, you can lease your laundromat equipment. Leases come in two general forms: capital leases and operating leases. Capital leases are effectively loan substitutes, meaning you’re financing equipment with the intent to own. Operating leases, on the other hand, are rental agreements that allow you to utilize equipment that is technically owned by the leasing company. This can be a useful arrangement if you want to frequently upgrade your machinery. If you’re buying from a manufacturer, see if they offer captive leasing, or are partnered with any equipment leasing companies.
Keep in mind, however, that leasing is almost always more expensive over time than buying.
Loans
If you’re looking to buy and can afford a downpayment, a slightly cheaper option than leasing is to get an equipment loan. Equipment loans are secured loans that use the equipment being purchased as collateral. This tends to result in better term lengths and rates than you’d see with a similar unsecured working capital loan.
SBA Loans
The Small Business Administration can help new businesses that may not otherwise qualify for competitive loan rates and terms to get them. The two most popular programs, 7(a) and 504, can both be used to purchase equipment. The term lengths offered by these programs can spread the cost of your equipment out over a long period and give your business time to mature. Just be aware that applying for SBA loans is an involved, time-consuming process.
Start Your Laundromat Business Off With The Right Equipment
Remember, a laundromat is itself something of an equipment rental business, with the customer “borrowing” your machines for short intervals to clean your clothes. That means your equipment should be one of the top priorities of your business.
Ready to do some purchasing? Check out our favorite equipment financers. Confused about some of the terminology? Take a look at our breakdown of the differences between equipment loans and leases.
The post Laundromat Equipment Guide: Expected Costs, Where To Purchase, & How To Finance Laundromat Equipment appeared first on Merchant Maverick.
Tech equipment–computers, IT equipment, and related items–poses some unique issues for businesses trying to decide whether to lease or buy. Tech equipment becomes obsolete more quickly than almost any other type of equipment, making it a poor long-term investment. At the same time, many businesses need to keep their tech hardware up-to-date in order to remain competitive.
Should you buy or lease your tech equipment? Read on.
How Does IT Equipment & Computer Leasing Work?
The word “lease” is often associated with rental agreements — like the ones you sign when you rent an apartment or lease a new vehicle. While those examples are the most common, the term has grown to encompass a number of other types of agreements.
Capital VS Operating Leases
While there are an enormous number of lease types with names like “triple buyout lease” or “synthetic lease,” almost all of them fall under two major umbrellas: capital leases and operating leases.
A capital lease encompasses leases like conditional sales agreements as well as $1 buyout leases and $10 buyout leases. A capital lease transfers ownership of the item in question to you, the lessee, either immediately or early during the lease’s terms. For all intents and purposes, the item is considered yours–it’s an asset on your balance sheet. Compared to operating leases, you’ll have higher monthly payments but a much smaller residual payment at the end of your lease (hence the $1 buyout, for example). You rarely, if ever, have the opportunity to return the equipment at the end of your lease. And why would you? You’ve already paid for its entire value, plus interest. If this sounds a bit like a loan, it should. You’d essentially use a capital lease as an alternative to an equipment loan.
Operating leases are more traditional leases. In fact, they’re sometimes called “true leases.” With an operating lease, the leasing company retains ownership of the equipment while you’re giving operating rights to it. This means the equipment is considered an operating expense for your business, rather than a purchasing expense. The most common type of operating lease is the fair market value lease (FMV). Typically, monthly payments will be lower with operating leases, but the amount left over at the end will be larger. Operating leases usually give you the option of returning the equipment to the leasing company at the end of your lease. You also have the option to buy it for its fair market value price, but in most cases, you’d be better off with a capital lease if you prefer to keep your equipment.
Buyout Agreements
If a lease has a buyout option, that means that you have the option to purchase (buyout) the equipment at the end of your lease. Many types of leases are named for the terms of the buyout. For example, a fair market value lease grants you the option of buying the item at its fair market value. A $1 buyout lease? You guessed it; you can buy the equipment for a dollar at the end of your lease.
Why the enormous difference in buyout amounts? Remember, a capital lease frontloads the cost of the equipment into your monthly payments. The $1 residual is essentially just a formality; you’ve already paid for the item. On the other hand, with an FMV lease, you’ve only been renting, so the cost to buy is based on what a used piece of equipment that age would cost on the market.
There are a lot more obscure types of lease agreements that you may run into, but generally speaking, you can expect capital leases to have small, insignificant residual payments and operating leases to have larger, more significant ones.
Common Lease Terms
Equipment leasing comes with a lot of jargon. Let’s demystify some of it.
Lessor:Â The company financing your lease. Think “lender” but for leases.
Lessee:Â The person or company taking out the lease. Think “borrower” but for leases.
Term Length:Â The length of your lease. A typical tech equipment lease may run anywhere from a year to five years. The longer your lease, the more expensive it will be in most cases.
Interest:Â The amount you’ll be charged in excess of the value of the equipment. Rates usually start at around 6% and top out in the high teens, though some may be higher depending on your credit, the lessor, and the type of lease you select.
Fees: These vary by lessor and state. They may include supplemental charges like administration, restock, insurance, and origination fees.
Monthly Payment:Â The amount of money you’re expected to pay your lessor every month.
Residual:Â An amount required to purchase the leased equipment at the end of the lease. Generally speaking, the lower your monthly payment, the higher your residual, and vice versa. Capital leases have lower residuals than operation leases.
Leasing VS Buying Computers & IT Equipment
So why would you lease tech equipment instead of buying it? Let’s look at some of the advantages and disadvantages of leasing tech equipment.
Advantages Of Leasing
Easy Upgrading: Tech equipment becomes obsolete very quickly, which can make it a poor longtime investment. An operating lease may allow you to stay up-to-date on the latest technology without having to re-purchase every couple of years. This can help small businesses keep up with the technological curve.
Smooths Out Cash Flow: Breaking the cost of your equipment down into predictable monthly payments has its advantages, even if you are paying more over time.
Shipping & Installation May Be Covered: Unlike business loans, leases more frequently cover the full expense of factory-to-operational expenses.
No Downpayment: With the possible exception of having to make your first month’s payment up-front, the entry costs of a lease tend to be very low.
Disadvantages Of Leasing
More Expensive: Between interest and fees, it’s pretty much guaranteed that you’ll be spending more money on the equipment than you would if you have purchased it outright.
You Can’t Easily Resell: If you want to offload your equipment before your lease is over, you may run into some legal complications. Make sure you know your lessor’s policies before you try to transfer ownership to a third party.
Legal Complexity: There are a lot of different types of leases with a lot of different rules. Is the item an asset or an operating expense? Well, that depends on the type of lease you have! Are you responsible for maintenance and upkeep, or is the lessor? Again, it depends on the type of lease you have.
You Need Good Credit: Given the responsibilities that come with leasing, most lessors want to see a solid credit score
Advantages Of Buying
Tax-Deductible: As a business owner, you can write newly purchased equipment off of your taxes.
Cheaper: It’ll be a bigger expense up front, but over the longterm, you’ll have saved a good bit of money.
The Equipment Is Definitely Yours: Want to resell, modify, lend it to your cousin in Tallahassee, or smash it with a sledgehammer? You can! (Check your local laws regarding e-waste, though, if you take the smashing option.)
Less Complicated: Buying is simple. You exchange currency for ownership of the item. There’s not much fine print to sift through.
Disadvantages Of Buying
You Need Cash On Hand: Buying means paying the price of the equipment all at once. That means you have to have a decent chunk of cash in your reserves — or be willing to take out a loan. This can be a big ask for businesses that run on thin margins.
You’ll Be Stuck With Obsolete Equipment: Tech equipment isn’t the best long-term investment. Eventually, you’ll be stuck with obsolete gear that isn’t easy to get rid of. And on that note…
It Depreciates Quickly: Ever tried selling your iPhone four years after you bought it? Tech moves quickly.
Computer Leasing VS Buying: Which Is Better For Your Business?
There are advantages and disadvantages to both buying and leasing computers and IT equipment. Consider leasing equipment with a high turnover rate if you work in an industry where being on the bleeding edge is advantageous. On the other hand, if you have modest tech needs and can comfortably use the same gear for longer than five years, it may make more sense to just simply buy the equipment you need. There are additional considerations for businesses trying to smooth out their cash flows or otherwise apply their limited resources to maximum effect.
Don’t have the cash to buy outright but aren’t sure if a lease is right for you? Consider an equipment loan. Not sure where to look for equipment financing? Check out our Best Equipment Financing Companies. Just starting out and need equipment for your office? Try our guide on how to Get The Equipment You Need For Your Startup Business With A Loan Or Lease.
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Most businesses need equipment to run their operations at full capacity. What they may not have at any given time is the ability to buy all the equipment they need out of pocket. Equipment loans and leases can fill the gap, but borrowers with bad credit may worry that they’ll be locked out of the financing they need.
Below, we’ll take a look at some of the challenges borrowers with bad credit may face in trying to get equipment financing — and some of the equipment financing solutions they can use to get around them.
Is It Possible To Get An Equipment Lease Or Loan With Bad Credit?
The short answer is “yes,” but it may take a little more work.
Equipment loans are an interesting case. As secured loans, you might assume they’d be less risky for the lenders than many of the unsecured loans offered to businesses with poor credit. While there’s some truth to that, the longer-term lengths of equipment loans still mean it will be a while before your lender recoups their investment. Because of this, you’ll see many equipment loans with minimum credit score requirements in the mid-to-high 600s. That can put them out of reach of someone who has recently endured financial hardship. As is usually the case when it comes to lending, there are exceptions, however.
Equipment leases cover a much larger spectrum of agreements, although many of them are even more credit-contingent than those of loans. The amount of leeway you’re cut will depend on the type of lease you’re applying for, and your lessors’ business model.
Bad Credit Problems You Might Encounter
Before we get to the solutions, let’s take a look at some of the challenges you may encounter when you try to get equipment financing with bad credit.
1) Fewer Options
It may not be fair, but businesses with better credit will always have more options than businesses that don’t. Your search changes from “the best possible deal” to the “best deal possible with my credit rating.”
That doesn’t necessarily mean there won’t be a lot of options, however. Many online lenders specialize in financing customers with bad credit. Just expect to do your due diligence and make sure you’re dealing with a reputable lender that won’t needlessly gouge you.
2) Higher Rates
Even the lenders who don’t use credit ratings to rule out borrowers often still use it to segment their borrowers into different grades. The better your credit, the lower the rates you’ll qualify for. Likewise, the worse your credit, the higher your rates will probably be.
Keep in mind, however, that not every financer weights credit score the same. The degree to which the funder depends on credit will vary based on how many other sources of information they have on you regarding your fitness as a buyer. Repeat customers, for example, are often given leeway that new customers aren’t.
3) Unsatisfactory Terms
Credit issues may constrain the type of agreement you qualify for. For example, you may have to settle for a lease with a higher or lower residual than you may have wanted. Alternately, you may end up with a term length that doesn’t fit your needs.
4) Bigger Downpayments
In some cases, reluctant lenders can be placated by offering them more money at the beginning of your term. In the case of loans, this may come in the form of a larger downpayment. In the case of leases, they may ask for an additional month’s payment upfront. Depending on how much cash you have on hand, this may or may not create unnecessary strain on your bottom line.
5) Rejections
You also run a higher risk of your application simply being rejected. Filling out applications takes time — time you could be spending on any other business-related-activity. Not only that, but too many pulls of your credit–especially hard pulls–can actually have a negative effect on your credit score.
The fewer applications you have to fill out and subject your credit to, the better.
7 Ways To Get Equipment Leases & Loans If You Have Poor Credit
So now you have an idea of the challenges you can face when looking for equipment financing while you have bad credit. Here are some ways you can overcome those challenges:
1) Improve Your Credit
It may not surprise you to hear that the best way to avoid having to apply for equipment financing with bad credit is to not have bad credit. Improving your credit takes time, but there are a number of different ways to go about it including:
Settling outstanding debts
Consistently paying your bills on time
Ask for higher credit limits on your credit cards
Don’t utilize all the available credit you have
2) Get A Co-Signer
You are more than a credit score. Financers don’t necessarily know that, but your friends and family do. If they trust you enough to do so, consider asking them to co-sign your loan if your lender gives you the option. Co-signing essentially adds an additional party as a guarantor for the loan or lease.
Just remember you’re putting your co-signer on the hook for your debt if you default. Be sure to read the fine print and make sure you understand what liens are involved and what kinds of assets are at risk beyond the equipment you’re financing. At the very least, both you and the co-signer will take a credit hit.
3) Take The Best Offer & Refinance
If you need help right away, you can always take a sub-par loan offer now and then refinance when you have access to better rates, either due to your credit improving or you having more time to hunt down a better deal. Keep in mind that this may not be an option with a lease, at least not until you’ve fulfilled your lease obligations.
4) Offer To Make A Bigger Downpayment
I mentioned this earlier under the “problem” section, but it’s also a solution. If your financer is on the fence about your application, you can sweeten the deal by offering to put more money down. In the case of a loan, it would be a larger downpayment. In the case of a lease, you could offer to pay the first and/or last month’s payment in advance.
5) Prioritize Equipment That Holds Its Value
When it comes to financing equipment, the equipment in question matters quite a bit. Remember, the equipment is the collateral. If you’re a lender, wouldn’t it be less risky to finance an item that retains more of its value over a longer period of time? That means you may have an easier time getting approved for, say, heavy machinery than you would an item that depreciates quickly, like a computer.
6) Prioritize More Expensive Equipment
Surprised? For the most part, big-ticket items tend to hold onto more of their value than less expensive items (consider how often you’d buy a tractor versus, say, a smartphone). If you default, your financer will prefer to collect an item that is still worth their time and effort to resell. Because of this, you may find that a prospective lender will be more accommodating if you have a more expensive piece of equipment in mind.
7) Defer Buying Until Your Situation Improves
While the newest models of a piece of equipment often come with intriguing bells and whistles, it doesn’t always pay to be an early adopter. If the older equipment you’re using right now still works or just needs minor repairs, it may be enough to carry you over the gap until your finances are in order. Besides, many times new models still have some bugs to work out.
Don’t Let Bad Credit Stop You From Getting Equipment Financing
Bad credit makes getting most kinds of financing more challenging, but it doesn’t necessarily have to stop you cold. With the right strategy and the right financer, you can get the equipment loan or lease you need to keep your business humming.
Need help finding an equipment financer? Check out our list of best equipment financers for small businesses. If you’re interested in more specialized guides, check out our resources on financing restaurant or gym equipment.
Confused about some of the terminology used in equipment financing? We can break down the differences between equipment loans and leases for you.
The post Bad Credit Equipment Leasing & Loans: 7 Equipment Financing Solutions If You Have Poor Credit appeared first on Merchant Maverick.
Businesses that have exhausted normal methods of acquiring capital may find themselves turning to less known methods, such as vendor financing. Like most forms of alternative financing, it’s less a broad solution and more a specific help for small businesses whose needs fall into a specific niche.
Is it the best choice for your particular small business financing needs? Read on to find out.
What Is Vendor Financing?
What is vendor financing? Another obscure form of alternative lending to keep track of? I know, I know.
Luckily, the basics of vendor financing (sometimes called seller financing) aren’t that complicated. Instead of approaching a third-party (a bank or online lender, for example) to get financing for a product or service, the vendor selling you the product finances it instead. Essentially, they’re providing the means to purchase their own products.
Since the vendor is taking on substantial risk in this type of arrangement, vendor financing is usually only an option for businesses that have a strong working relationship with the vendor, although there are exceptions.
How Vendor Financing Works
In a way, vendor financing harkens back to the barter system, with two businesses making a trade.
Vendor financing typically takes one of three forms, which I’ll go into in the next section. In either case, the vendor will allow you to acquire their goods or services in exchange for:
A promise of repayment
Equity in your company
Credit with which to acquire your goods or services.
Depending on the arrangement you agree to, the financing may not cover the entirety of the purchase. In that case, you’ll be asked to make a downpayment.
Types Of Vendor Financing
The term “vendor financing” encompasses a number of different arrangments a vendor can make with a small business. The three most common are:
Debt Financing
If your vendor is extending debt financing, they’re essentially offering you a loan. But instead of receiving a lump sum of cash, you’ll receive the goods or services agreed upon. In many cases, the vendor will only finance a percentage of the cost of their item, which means you’ll have to produce a downpayment of some kind.
From here, debt financing looks a lot like a loan. You’ll work out a payment schedule with your vendor, as well as an interest rate–if your vendor wants to make the sale badly enough, there may not be one, but don’t count on it–and put up any collateral necessary. If you’re acquiring a tangible item, debt financing might resemble an equipment loan, with the item serving as collateral.
Whether or not this is a good deal for your business will depend on the terms agreed upon, especially in comparison to any loans you may qualify for. Mature businesses looking for vendor financing will probably prefer debt financing to equity financing since it has fewer long-term repercussions on your operations.
Equity Financing
Vendor financing doesn’t necessarily involve taking on debt. In some cases, a vendor may offer your goods or services in exchange for a share of equity in your company. The vendor then becomes a shareholder, receiving dividends and participating in your business decisions.
In most cases, a business that agrees to equity financing will be a startup that doesn’t have the credit or history to qualify for other types of financing. Since you’re involving outside entities in your business operations, you’ll need to factor that into your business plans and risk assessments.
Service Swap
In less common cases, a vendor may be willing to trade their product for one of your own of similar value. These types of agreements are much more likely to be informal and between companies that already have a strong working relationship.
Vendor Financing Pros & Cons
So what are the pro and cons of using vendor financing?
Pros:
You Can Bypass Financial Institutions Entirely: If you don’t match the profile of a good borrower, it can be difficult to get the money you need to buy inventory, equipment, or vital services. Vendor financing allows you to plead your case directly to the company you’d be spending your money with.
Startups Can Get Important Items: Startup financing is one of the great stumbling blocks when you’re starting a business. Without a business history, lenders may not want to take a risk on you. Equity financing gets around this Catch-22.
It Helps Vendors Make Sales: While “giving away” a product with an IOU may carry some risk, a deferred payment still allows a company to move inventory it may not otherwise have been able to.
Cons:
You’re Limited To What The Vendor Sells: Vendor financing is only good at the company that you’re petitioning. With a working capital loan, for example, you can split your lump sum between multiple expenses.
It’s Not That Common: If you’re counting on vendor financing, you’ll likely end up constrained in terms of your choice of vendors.
It Exposes Both The Vendor & Buyer To Risk: Neither company is a bank. Vendor financing adds complexity to what would otherwise be a pretty simple retail transaction. The vendor needs to have a plan for if the buyer defaults. The buyer needs to read the fine print and make sure they have recourse under state law if they’re unable to fulfill the terms of the agreement.
When To Use Vendor Financing
If you’re considering debt financing, it’s probably because you have a strong working relationship with the vendor in question. Trust is the name of the game here, so being a reliable, valued customer will come in handy. Whether or not it’s a good deal relative to an equivalent loan will depend on the terms you’re offered, though it’s quite possible that you can end up spending less than you would servicing a traditional loan.
When it comes to equity financing, you’re looking at a more specific niche. Startups willing to part with some of their equity to obtain necessary equipment may find it easier to cope with than taking on personal debt.
Finally, any two businesses that are comfortable with the arrangement may be happy to swap services.
Final Thoughts On Vendor Financing
Vendor financing is a quirky but legitimate way to get your business the inventory, equipment, or services it needs, so long as you approach the matter with a clear idea about its perks and drawbacks.
For other ways to get vendors to finance their own products, you may want to read up on captive lessors.
Looking for forms of financing that don’t involve taking out a loan? Read The Merchant’s Guide To Invoice Factoring. Have a startup and need financing, but aren’t sure you want to give up equity right now? Find out how to Get The Equipment You Need For Your Startup Business With A Loan Or Lease.
The post What Is Vendor Financing & When Should Your Small Business Use It? appeared first on Merchant Maverick.
The first few months of your business can be critical to its longterm success. When you’re running a startup business, you’re an unknown quantity; your customer base hasn’t solidified, and many lenders may be reluctant to take a risk on you.
Still, you’ll need to find ways to get the equipment you need to make your business a success. If you’re not independently wealthy, that means getting financing. Below, I’ll walk you through some of the ways you can use loans and leases to finance your equipment and get your startup off the ground.
First: What Is A Startup?
The word “startup” is often fetishized in the business world, conjuring images of sweatshirt-wearing innovators living in pods in the Bay Area, and eventually pushing out some kind of software application.
The truth, however, is that you don’t have to be a Stanford whiz kid with shadowy angel investors to have a startup. You just have to be running a new business–typically between zero-to-two years old, sometimes three–that’s trying to capitalize on perceived market demand. Startups are usually at a stage of development where their revenue is uncertain and may not be able to sustain the company long-term without a larger clientele or a cash infusion from those venture capitalists we’re always hearing about.
Because they’re at a stage where their finances aren’t stable, startup owners often have a hard time accessing other types of lending. Equipment financing, however, has some properties that can make it accessible even to startups.
How Equipment Financing Works
Equipment financing, as you may have guessed from the name, covers financial products designed to help the borrower (or lessee) acquire physical assets for your company. This can include anything from vehicles to ovens, computers, heavy machinery, etc.
Why is there specialized financing for these types of expenses, and why should startups care? Well, because you’re dealing with a physical asset that has resale value, your lender can place a lien on the equipment you purchase, allowing it to serve as collateral for the loan. If you default, the lender can repossess the item and resell it. This mitigates some of the risk lenders take on when they’re dealing with entities that don’t have a long, stable history. Essentially, all equipment loans are secured loans. Leases have their own logic, which I’ll touch on in the next section, but they also benefit from working with a transferable product.
Equipment Loans VS Equipment Leases
One of the more confusing aspects of equipment financing is that it encompasses two very different types of financing that are, nevertheless, discussed interchangeably. These are equipment loans and equipment leases.
Let’s start with the more familiar: equipment loans are installment loans used exclusively to acquire hard assets. They use the asset as collateral for the loan, ofter resulting in better terms than you’d see for, say, a comparable working capital loan. Payments, made monthly, are usually spread out over a pretty long window (three to seven years). In most cases, you’ll be expected to make a downpayment on the equipment in the neighborhood of 15%. Equipment loans usually have better rates than comparable leases.
Equipment leases are a universe unto themselves. While they were traditionally used for renting equipment, and still are, leases encompass far more than simple rental agreements. Depending on the lease agreement either you or the financing entity (called a lessor) own the title for the equipment for the duration of the lease. This has fairly profound tax ramifications, so make sure you talk to an accountant if you’re trying to maximize your value here. Like loans, leases spread the cost of your equipment plus interest over the course of the term length. Unlike loans, some of the cost is leftover after the term length, an amount called a residual. This amount may be as little $1, or as high as the fair market value of the product. How much it is depends on the type of lease you got. Capital leases, which are meant to replace loans, typically end with a small residual and you assuming full ownership of the equipment. Operating leases, often shorter in duration, will leave a larger residual, but you’ll have the option to return the equipment as well as buy it. Leases also typically finance the full cost of your equipment, minus the first and sometimes last month’s payment, which can make them a better option if you don’t have a large sum of cash laying around.
5 Reasons Equipment Loans & Leases Are Good Options For Startups
So now you know that equipment financing is at least an option for financing your startup business costs. Here are some pros to using equipment loans and leases as a startup:
1. They’re Easy To Qualify For
I touched on this above, but equipment loans and leases carry less risk to financers than unsecured loans and don’t require you to come up with an exotic source of collateral like most other types of secured loans. The result is financial products that are more accessible to startups.
2. No Collateral Requirements
It’s not every day you can get a secured loan without actually having to put up any of your own collateral, but equipment financing allows you to do just that. With equipment financing, the equipment you’re acquiring is the collateral.
3. Equipment Vendors Want To Give You Financing
Companies that sell big-ticket items know their products are expensive and hard to buy with petty cash. Because of this, many provide captive lessors. Essentially, they’ll lend you money to buy their product. Weird, right?
4. Bigger Downpayments Can Circumvent Qualifications
Equipment loans and leases are generally easier to qualify for to begin with, but you have some additional leverage that you don’t have with many other types of financing: if you can manage a bigger downpayment (or pay for an additional month in the case of a lease), the financer may waive some of their qualifications.
5. You Can Rent Equipment That Depreciates Quickly
Some types of equipment (think computers) have much shorter effective lifespans than others. Operating leases allow businesses to use and then return equipment that may not make a good longterm investment.
5 Reasons A Startup Should Avoid Equipment Loans & Leases
Equipment loans and leases have advantages, but are they really a good idea for your business? Let’s explore some of the downsides:
1. They Can Be Expensive
Anything involving accumulated interest can potentially be a trap for the unprepared, and equipment financing is no different. Leases, in particular, can carry punishing interest rates that get hidden within their complicated terms. Calculate how much you’ll ultimately be paying above the equipment’s ticket price and decide if the investment is worthwhile.
2. If You Default, You Can Lose A Vital Piece Of Equipment
The downside to having the equipment you purchase serve as collateral is that it’ll be the first thing your financer comes for if you default on your payments. If that equipment is vital for your operations, you may have a problem.
3. Equipment Vendors Want To Give You Financing
Recognize this one? This can be a pro, for sure. But as convenient as a captive lessor can be, you should also be prepared for extremely high-pressure sales tactics from them. They lose very little by bullying you into a lease you’re not prepared for.
4. Your Startup May Not Have That Much Cash
If you had large chunks of money to throw at equipment, would you be looking for financing in the first place? While we’re talking about the difference, say, between 15% and 25%, that may be a lot for a company without steady revenue.
5. You Need To Know What You’re Doing
Leasing and returning equipment can make fiscal sense, especially once you factor in tax optimization, but this isn’t a game for beginners. You’ll need to be very familiar with the type of equipment you’re buying, tax codes, and prevailing market values to get the most out of shorter-term leasing.
What You Need To Qualify For Equipment Financing
If you think equipment financing is the right option for your startup, you’ll want to be prepared when it comes time to fill out your application. First, you’ll want to know what your credit score is. Credit scores aren’t always a make or break for equipment financing, but you’ll have a much easier time with good credit than you will with poor. You’ll also want to have the standard information financers expect for loan applications. These include things like:
Legal documents and licenses
Bank statements
Tax returns
Statement of owner’s equity
Business history
Income sheet
You’ll also need to provide information about the product you’re buying and who you’re buying it from. Having that information on hand will greatly speed up the application process.
The good news is that equipment financing is one of the faster forms of financing you can get, with time to funding usually measured in days rather than weeks or months.
Next Steps
Does equipment financing sound right for your startup? Wondering where to go from here? We’ve got many more resources available for you!
Check Out Our Favorite Equipment Financers For Small Businesses
If you’re ready to find a lender or lessor to finance some equipment for you, you’ll want to take a look at our list of favorite equipment financers.
Don’t Think An Equipment Loan Or Lease Is Right For You? Take A Look At Other Financing Options For Startups
Did we talk you out of seeking an equipment loan or lease, but you still need financing? Check out our other financing options for startups.
The post Get The Equipment You Need For Your Startup Business With A Loan Or Lease appeared first on Merchant Maverick.
One of the most common expenses a business can encounter is the need to purchase or upgrade equipment, but choosing an equipment leasing company can be a challenge. Choosing one that will give you a good deal that fits the specific needs of your company can be downright daunting.
Don’t know a TRAC lease from a leaseback? A tax lease from a synthetic lease? Not sure where to start looking? The equipment leasing industry’s websites are notoriously full of opaque, specialized terms … and that’s when specific terms are offered at all.
We’ll try to demystify the process below, and hopefully put you on the right track.
Financing Need
Best Product Type
Recommended Lender
Financing Platform
Any
Currency Capital
Equipment Purchasing
Loan
Lendio
Renting
Operating Lease
Crest Capital
Big Ticket Items
Any
TCF Equipment Financing
Purchasing w/Lease
Capital Lease
CIT Direct Capital
Find A Lessor Who Will Work With You
The easiest way to rule out a potential lessor (the company that finances the lease) is to see if they serve your industry. Most lessors, particularly those that work with resales, specialize in specific industries. Even the least transparent lessors tend to be upfront about the industries they’re able to finance, so it’s not a bad place to start. If possible, you’ll also want to see if they finance the specific type of item you’re looking for.
Next, you’ll want to take stock of your own profile as an applicant. How good is your credit? How long have you been in business? What’s your revenue? How much debt have you taken on?
Lessors don’t always advertise their minimum qualifications. Since your time is limited and valuable, if you have reasonable doubts about your ability to qualify with a particular lender, I would recommend prioritizing more transparent lenders. You don’t want to waste time filling out a long application only to be rejected. To save yourself some headache, take advantage of online screening/pre-qualifying tools the lessor might offer.
Choose The Right Leasing Arrangement
This is where it gets a little complicated.
Because you’re dealing with a tangible asset, when making a deal with a lessor, you’ll need to be prepared to work through an enormous number of lease variations covering different possible ownership arrangements.
The simplest leases function as loan replacements. That is to say, the lessor finances your equipment, which you are considered to have ownership of either immediately or by the end of the lease. You’ll make regular payments, typically monthly, for the length of your lease, at the end of which you’ll pay a small residual fee to close it out. These are called capital leases.
Why would you want a capital lease instead of a straightforward loan? While the interest rate is usually higher than it would be with a comparable loan, a capital lease covers the full cost of the equipment you’re buying and, very often, associated transportation and installation costs as well. These leases also tend to be easier to get than traditional loans.
But what if you don’t want to own the equipment long-term?
In that case, you may want to look for an operating lease. Operating leases are more like rentals with the option to buy. The lessor will retain official ownership of the asset, but you’ll have possession of it for the length of the lease. At the end of the term, you’ll have the option to return the equipment to the lessor or purchase it for a residual — typically fair market value (FMV).
There are a huge number of variations on both operating and capital leases, as well as tax advantages and disadvantages to both which you should discuss with an accountant. But generally:
If the equipment you’re considering will not become obsolete quickly and you’d like to own it, choose some form of capital lease.
If the equipment you’re considering depreciates quickly or becomes obsolete within a couple years, you probably want an operating lease.
Once you know what type of lease you want, you can narrow down your list of eligible lessors.
What About Equipment Loans?
Nothing wrong with them! If you’re looking at capital leases, you should also consider getting an equipment loan.
Equipment loans usually cover around 85 percent of the cost of the item, so be prepared to make a downpayment unless your lender specifies that they cover the full price.
One nice thing about equipment loans is that the purchase itself can serve as collateral (or security) for the loan, which means you’ll generally see lower interest rates than you would with an equivalent unsecured loan.
Check out our equipment financing resources if that sounds interesting.
Lender
Borrowing Amount
Term
Interest/Factor Rate
Additional Fees
Next Steps
$2K – $5M
Varies
As low as 2%
Varies
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$5K – $500K
24 – 72 months
Starts at 5%
Yes
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Up to $250K
1 – 72 months
Starts at 5.49%
Varies
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While the ability to get financing is great, you don’t want to pay more than you have to for the pleasure. This is much easier when you’re dealing with transparent lenders who lay all their cards on the table.
What terms and fees should you be aware of when looking into an equipment lease?
Interest Rates:Â The biggest cost you’ll run into with financing should be the interest rate. Generally, lower is better, but make sure you know how often and in what way the interest rate is applied.
Origination Fee:Â Common with loans, but unusual with leases, this is a fee that’s applied upfront. In most cases, it is deducted from the amount of money you receive when you get your capital.
Administrative Fee:Â This can be rationalized in any number of ways by your equipment financer, but it is a fee charged for servicing your account. It may be charged once, or at specific intervals.
Downpayment:Â The percentage you’re expected to pay out of pocket towards the equipment you’re buying. Common with equipment loans. With leases, there generally isn’t a downpayment, but you may be expected to pony up the first and last month’s payment up front.
Monthly Payment:Â The amount of money you’re expected to pay each billing cycle, usually monthly. In the case of leases, the higher your payment, the lower your residual will be.
Residual:Â An amount leftover at the end of your lease that you pay if you decide you want own your equipment. The lower your residual, the higher your payments will be.
The Best Equipment Leasing Companies
Not ready to build a spreadsheet comparing every equipment leasing company on the market? No worries. We can get you started.
Note that you’ll also want to consider leasing from banks or credit unions with which you’ve already built a relationship, as many times they can offer you the best rates (assuming you make the credit cut). If you’re dealing with a major brand, you may also want to consider working with a captive lessor.
Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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One of the most efficient ways to seek equipment financing is through an aggregator service like Lendio. With one application, you’ll effectively have access to Lendio’s 75+ affiliates. One nice thing about this service is that it’s free on the borrower’s end, so you’ll only have to worry about fees charged by the company Lendio ultimately connects you with.
Be aware that, although Lendio can work with customers with credit as low as 550, for equipment financing you’ll usually need to have a credit rating over 650.
For those who successfully apply, Lendio’s partners will finance the full cost of your equipment.
Currency Capital
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Time in business: 6 months
Business revenue: $75,000 per year
Personal credit score: 585 or above
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Another aggregator option for equipment financing is Currency Capital.
While online lenders have taken great pains to streamline application processes for working capital loans, equipment financing tends to be more traditional. Currency set out to change that, developing an API they compare to Amazon’s 1-click shopping experience.
Getting setup with Currency is a bit more laborious than, say, working with Lendio, but if you’re thinking ahead to future purchases, it may be worth the investment.
Crest Capital
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Time in business: 24 months
Personal credit score: 650
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Want to skip the middle men? Check out Crest Capital.
Crest deals in just about every kind of lease you could think of, whether you want to own your equipment or just operate it for a little while. Additionally, they’re able to work with a wide variety of industries including agriculture, manufacturing, automative, and medical, as well as office equipment and software.
You will need to have been in business for at least two years, however, and have a credit rating of 650 or better.
TCF Equipment Finance
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Time in business: 5 years
Personal credit score: 700
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TCF Equipment Finance, as the name implies, is the equipment financing and resale wing of TCF Bank. As a bank, their lending practices are as conservative as their pockets are deep. That means TCF is a good solution for mature businesses with excellent credit.
TCF offers many variations on capital and operating leases and works with most industries.
CIT Direct Capital
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Time in business: 2 years
Business revenue: $100,000 per month
Personal credit score: 680
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Another good option for those with solid credit ratings is CIT Direct Capital. Their equipment financing division doesn’t have quite as broad a variety of lease types of some of the other options here, but it’s easier to meet their qualifications than those of many banks.
Both capital and operating leases are offered.
Final Thoughts
Between the hundreds of equipment leasing companies out there and the often strict qualifications needed to get financing, it can be a challenge to find a lessor who meets your needs. Hopefully you now have a better sense of what to look for when choosing an equipment leasing company.
Having trouble meeting the high lending standards for equipment financing? Don’t panic! Many other types of financing can be used to purchase equipment. For smaller items you can pay off quickly, you may want to consider a business credit card. For larger items, check out installment loans.
The post How To Choose An Equipment Leasing Company appeared first on Merchant Maverick.
Have you ever looked around your local bar and thought, âI could run a place like thisâ? For many, itâs easy to get caught up in the excitement of potentially opening a bar, but for a select few, this is more than just a fleeting idea. These aspiring entrepreneurs want to make this dream a reality.
Opening your own bar or sports pub seems like a fun and exciting experience. After all, who doesnât love gathering with friends and family to watch the big game with a cold drink in hand and appetizing snacks on the table? Behind-the-scenes, though, itâs a little different. While it may seem exciting to become a small business owner and call the shots, thereâs also a lot of planning and work involved in starting a profitable business.
If opening a little corner pub sounds like a dream come true but you donât know quite where to begin, youâre in the right place. In this article, weâll share our top tips for starting the exhilarating and lucrative path to owning your own bar. Weâll go over what you need to legally open a bar, expenses to start and maintain your business, and the importance of a business plan. Weâll also help you decode one of the biggest pieces of the small business puzzle: getting financing for your new business.
If youâre ready to stop dreaming and start doing, keep reading!
Begin With Branding
One of the first things you need to do before you take off running is to visualize a name, a theme, and an overarching concept for your bar. Do you picture yourself running a neighborhood pub where all of the locals gather? Or maybe youâd rather open a thriving nightclub where young club hoppers from around your city come to dance the night away?
Evaluate your different options, considering the type of patrons youâd like to attract as well as where you plan to open your bar. For example, if you want a younger crowd, a nightclub in a trendy part of town makes sense. If you want to attract an older, more sophisticated crowd, consider opening a wine bar, martini bar, or cigar bar in a thriving downtown area. You could also target sports fans by opening a sports bar or draw in foodies with a new gastropub.
Speaking of your barâs name, it goes without saying that youâll need one. Because itâs your bar, youâre free to name it anything you want. However, you want to make sure that you choose a name that reflects your concept. âJohnâs Neighborhood Barâ may incorporate your name, but it doesnât stand out. When brainstorming ideas, think about the audience you want to bring in and pick a moniker thatâs attention-grabbing — a name that lets customers know what to expect when walking through the doors of your bar.
Find A Location
One of the most important first steps in opening your own bar is choosing a location. There are a few options you have at this stage of the game:
Purchase an existing bar
Start from scratch
Buy a franchise
There are advantages and disadvantages for each option. If you purchase an existing bar, you inherit the existing clientele and may see immediate income. However, you could pay a steep premium if the bar is extremely successful at the time of sale. You may also rack up high costs if the bar doesnât mesh with your vision and you have to pay for renovations.
If you start from scratch, youâll be able to see your vision through from start to finish. However, it may take many months (or even a year or longer) to open your doors, and the costs can really rack up if you have to completely renovate a space or build a new bar from the ground up. With this option, careful planning, budgeting, and at least some knowledge of the bar and restaurant industry are needed for the highest chance of success.
Finally, you could purchase a franchise. This option could shield you from some of the mistakes you’d almost certainly encounter if you attempted to go it alone. However, you wonât be able to fully showcase your creativity with a franchise.
Finding a location takes planning and a dedicated eye on financials. Sure, putting your bar in a trendy and popular neighborhood could help your business become your cityâs next hotspot, but real estate costs may be prohibitively high. Before you put down money on a location, make sure to do your market research and understand the costs.
Create A Business Plan
Every successful business starts with a solid business plan, and a bar is no exception. Not only will your business plan act as a blueprint for starting, operating, and growing your business, but itâs also a necessity if you plan to apply for business loans from a bank or other lender.
No two business plans are exactly alike, but there are some standard sections you should have in yours. This includes:
Executive Summary: Basic information about your business and why it will be a success
Company Details: Specific details about your business
Organizational Chart: Outline of your company structure
Marketing Strategy:Â How will you market your business?
Financial Projections: Show the financial outlook of your business
Your business plan should showcase the goals of your company and serve as a map for you to follow, keeping your business on the right path. Lenders will want to see a business plan that demonstrates thought, intelligence, research, and reasonable plans for success in the future.
Register Your Business
Before you open your bar and begin serving customers, you have to register your business. First things first: register the business’s name with your state. This can be completed via the county clerk’s office in the state where youâll operate.
Next, youâll need to determine your formal legal structure. Do you plan to be a limited liability company or a corporation? Your business structure will determine how much you pay in taxes, what paperwork needs to be filed with the government, and your personal liability. If youâre unsure of which structure is right for your new business, consult with an attorney, accountant, or business counselor.
Your business will also need to be registered with the state revenue office and the Internal Revenue Service. Because your business will have employees, youâll be required to apply for an Employer Identification Number. Youâll also need a sales tax permit.
Finally, youâll be required to obtain the proper licenses and permits to legally operate your business. Because your bar will serve alcohol, a liquor license is required. If your bar serves food, youâll need a license from the health department. You can find out more about the requirements in your area by contacting your state Department of Commerce.
Obtain A Liquor License
In the previous section, we touched on acquiring the right permits and licenses. One of the most important things you need to open a bar — if not the most important thing — is a liquor license. This license makes it legal for you to sell alcohol in your business. This should be a top priority, as getting approval from your stateâs Alcohol Beverage Control agency typically takes at least one month. In some cases, it may take up to six months to get approved.
The steps required to obtain your liquor license vary by state. In all states, though, you will be required to fill out an application. You may be required to submit additional documentation with your application, such as a certificate of incorporation, your proposed menu, and the certificate of title for your bar. You may also be required to pay a processing fee.
Once your application is reviewed and approved, youâll have to pay for your license. Fees vary by state and range from a few hundred dollars to several thousand dollars. Your license will last for at least one year, and you must pay a fee when itâs time to renew.
Even though getting your liquor license is a hassle and can get very expensive depending on your state, this is a critical step that canât be overlooked. To learn more about the process, fees, and type of license required for your business, contact your state ABC agency.
Seek Funding
Business licenses. A construction loan or lease. Renovations. You havenât even stocked your bar, and the expenses are already piling up. Unless youâre already a successful entrepreneur with plenty of money in the bank, these expenses may seem completely overwhelming.
Very few small business owners have the resources to launch a business on their own. Instead, they turn to lenders for money to fund startup costs. Even after you launch your business, there will always be a need for more capital, whether an emergency has popped up, you need to expand, or a slow period has affected your day-to-day operations.
Even if your credit history is blemished, youâre a startup with no business history, or you face other challenges, thereâs funding out there if you know where to look. Start with these options.
Personal Savings
Many new business owners have at least a little bit of money put away in their savings accounts. If youâve been socking away pennies for a rainy day, now may be the opportunity to put these savings to use. By using your own money, you wonât be indebted to a lender (or at least not as much). You wonât have to worry about making scheduled payments, and there wonât be interest or fees to worry about. On the downside, if your business is unsuccessful, you lose part — or all — of your savings.
Loans From Friends & Family
If you have a friend or family member with extra money to invest, pitch them your business idea to see if theyâre interested. But be careful! Even though you have a more personal relationship with this person, donât just have a casual conversation asking to borrow funds. Instead, give them your business plan and present your pitch just as you would with a bank or other lender. Show them why you think your business will be a success, and give them a good reason to invest in you.
If you come to a loan agreement, get everything in writing, including the total borrowing amount, rates, and terms of the loan. Put your personal relationship aside and make sure you follow all terms of the loans just as a responsible borrower should.
Personal Loans For Business
Getting a startup loan from a bank or other lender can be tough. Sure, there are options, such as Small Business Administration loans, but these loans can be very difficult to receive — especially if you have a short time in business or low annual revenue. However, if you have a solid personal credit profile, more low-cost loan options are available to you.
Instead of going directly for a business loan, try applying for a personal loan for business. With a business loan, lenders consider your time in business, personal and business credit histories, and annual revenues. But with a personal loan, your personal credit score and income are used to determine if you qualify.
By going this route, you may be able to avoid many of the high fees and interest rates of alternative business loans. Depending on your credit history and the lender you select, your cost of borrowing could be much lower with a long-term, low-interest personal loan.
Recommended Option: Upstart
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Time in business: N/A
Personal credit score: Minimum 620
Business revenue: N/A
Borrower requirements (click to expand)
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You may qualify to receive a personal loan of between $1,000 and $50,000 through Upstart. These loans have competitive interest rates starting at 7.74% and going up to 35.99% based on your creditworthiness. Repayment terms of 36 or 60 months are available. The application process is quick, easy, and completely online.
To qualify for an Upstart personal loan, you must meet a few basic requirements, including having a valid email address, verifiable personal information, a source of income, and a U.S. checking account. You also have to meet the lenderâs credit requirements, which include:
A credit score of 620 or above OR 580 or above for California residents
A solid debt-to-income ratio
No bankruptcies or public records
No delinquent accounts or accounts in collections
6 or fewer inquiries on your credit report over the last 6 months
Lines Of Credit
A more traditional financing option is a flexible line of credit. The one drawback with a line of credit is that business performance is typically a qualifying factor. If you havenât made any sales, you wonât qualify, so this isnât a good financial option if youâre not in business yet.
As you build your business, though, a line of credit can be very useful. It can be used to purchase supplies, inventory, or cover that emergency that pops up when you least expect it. You can also use your line of credit to cover payroll or daily operational expenses.
When you receive a line of credit, a lender provides you with a credit limit. You can make as many draws as you need against the line of credit up to and including the credit limit. Once you initiate a draw, the lender will transfer the money directly to your bank account, giving you access to the money you need. Over time, youâll make payments that are applied to the principal (the amount youâve borrowed) and any fees and/or interest charged by the lender.
A line of credit is a revolving account, so as you repay the lender, money becomes available to draw again.
Recommended Option: Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
Borrower requirements (click to expand)
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You may qualify to receive a line of credit of up to $100,000 through Fundbox. Fundbox lines of credit have no restrictions and can be used to cover any business expense. Once approved, youâll be eligible to make draws immediately and receive funds as quickly as the next business day.
The Fundbox application process takes just minutes, and itâs easy to qualify. The lender focuses on the performance of your business — not your business or personal credit history — so even borrowers with credit challenges can qualify. You do, however, have to meet the following requirements:
Own a U.S.-based business
Have a business checking account
At least 3 months of transactions in your business bank account or at least 2 months of activity in a supported accounting software
At least $50,000 in annual revenue
Once you make a draw on your line of credit, automatic drafts are made weekly from your linked business checking account. If you do not use your funds, you do not pay. Repayment terms are 12 or 24 weeks and fees start at 4.66% of the total borrowing amount.
Business Credit Cards
Business credit cards work just like the personal credit cards in your wallet, only theyâre used to pay business expenses. Business credit cards are great for emergency expenses or any time your cash flow is a little short. You can also make recurring payments, such as your utility bills, using a business credit card. This is especially beneficial if you have a rewards card that gives you cash back or other rewards simply for making qualified purchases.
When you apply for a credit card, your lender will set a credit limit if youâre approved. You may spend up to and including this credit limit with one or multiple transactions anywhere credit cards are accepted. Each month, youâll make a payment that is applied to the principal, interest, and fees charged by the lender. As you pay down your balance, funds will become available to use again. If you donât have a balance, you wonât pay any interest, although you may have to pay annual fees depending on the card you select.
Recommended Option: Chase Ink Business Unlimited
Chase Ink Business Unlimited
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Annual Fee:
$0
Purchase APR:
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 on purchases in the first 3 months
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: 0% for the first 12 months
Foreign transaction fee: 3%
Rewards:Â
Unlimited 1.5% cash back rewards on all purchases
Notable perks & benefits:
Employee cards at no additional cost
Travel and purchase coverage
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If you have an excellent credit score of at least 740, you may qualify for the Chase Ink Business Unlimited credit card. This is a rewards card that provides you with unlimited 1.5% cash back on all purchases made for your business. As a new cardholder, you will also be eligible to receive a $500 cash back bonus if you spend $3,000 within 3 months of opening your account.
The Chase Ink Business Unlimited card comes with a 0% introductory APR for purchases and balance transfers for the first 12 months. After the introductory period, the card has a variable APR of 15.49% to 21.49%. This card comes with no annual fee. You can also receive additional cards for employees at no extra cost.
Rollover For Business Startups (ROBS)
Do you have a retirement account? If so, you can legally leverage these funds to pay your startup costs without facing tax or early withdrawal penalties. With a Rollover for Business Startups (ROBS) plan, you can put your retirement account to work for your new business.
It’s possible to access your retirement account funds with no penalties in just a few easy steps. First, create a new C-corporation. Next, create a qualified retirement plan for the corporation. Then, the funds from your qualified retirement account are rolled over into the new retirement plan. Finally, the funds that were rolled over can be used to purchase stock in the corporation, giving you access to the capital you need to start or grow your business.
Throughout the process, you do have to remain compliant and follow legal guidelines. For most new business owners, the process can get confusing, which is why ROBS providers are available to help. A ROBS provider will set up your ROBS plan to ensure everything is by the book. To get started, youâll need to pay a setup fee, then pay a monthly maintenance fee for maintaining your account.
The great thing about ROBS plans is that you are using your own money, so you wonât have to pay interest on a loan. You will, however, have to pay a monthly fee to maintain your account. You also risk losing your retirement funds if your business is unsuccessful.
Recommended Option: Benetrends
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Varies based on the type of financing you seek.
Must have a personal credit score of 660 or above.
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Benetrends is a pioneer of ROBS, launching its Rainmaker Plan in the 1980s. This visionary-plan is the longest-running ROBS plan, and Benetrends offers many benefits that outshine its competitors.
With just four easy steps, Benetrends can get the capital you need from your qualified retirement plan. With the Rainmaker Plan, you can have your funding is as little as 10 days.
To qualify, you must have an eligible retirement plan with at least $50,000. Most retirement plans are eligible, with the exception of Roth IRAs, 457 plans for non-governmental agencies, and distribution of death benefits from an IRA other than to the spouse. There are no time in business, annual revenue, or personal credit score requirements.
To get started with Benetrends, youâll be required to pay a setup fee of $4,995. After paying this fee, your C-corporation and ROBS plan will be set up. After your plan is set up, youâll be required to pay a monthly maintenance fee of $130. This fee covers ongoing support and services including legal support, audit protection, and compliance.
Purchase Financing
Paying your vendors will be an ongoing expense for your business. You have multiple options available to pay your vendors. You can pay out-of-pocket, you can use a credit card or line of credit, or you can take advantage of purchase financing.
With this type of financing, your vendors are paid immediately, while you get more time to pay. A lender pays your vendors up front, then you repay the lender over a set period of time. The lender will add fees and/or interest to your loan balance for paying your expenses upfront.
By using purchase financing, youâre able to pay your vendors immediately to receive the supplies, inventory, or services you need for your bar. Then, you can spread out your payments over time to make these purchases more affordable for your business.
Recommended Option: Behalf
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No specific time in business, revenue, or credit score requirements.
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Behalf offers purchase financing of up to $50,000 for qualified borrowers. Repayment terms of up to 180 days are available. Behalf charges fees of 1% to 3% of the borrowed amount per month for using this service. There are no additional fees. You can repay on a weekly or monthly schedule.
Behalfâs financing can be used to pay merchants for inventory or services. However, there are some restrictions. You canât pay bills, cover payroll, or pay other existing debt through Behalf.
Behalf analyzes the performance of your business when making its approval decisions. There are no time in business or business revenue requirements. Behalf does not have a minimum personal credit score for approval, although your credit history will be considered during the application process.
Create Your Menu
Before you open your bar, you need to know what food and drinks you plan to serve and what equipment is needed to properly prepare each menu item.
When planning your menu, think about your theme and the type of customers you plan to attract while also keeping your budget in mind.
Decide what type of drinks youâll serve. Most bars serve a variety of wines, beers, liquors, and mixed drinks, but what you serve may be different based on the theme of your bar. For example, in a sports bar, your drink menu may feature a wide selection of beers. If you open a nightclub, you want to have a variety of liquors and mixers on hand to create many different types of drinks. If you have a cigar bar, wines and craft beers may make up the bulk of your menu. Again, the type of bar you want, the theme, and your target audience can help you determine what you serve.
If your bar will serve food, think about the types of food youâll serve. In a neighborhood bar, appetizers like fried cheese sticks or nachos may be enough to keep your customers happy. If you have a gastropub, meals made with high-quality ingredients should make up your menu. Remember, creating the perfect menu takes careful planning, so take the time to brainstorm your ideas.
Itâs also wise to start off small and add new items as your business grows. If you have a huge menu that features every type of food and beverage you could think of, your bar will require more equipment. More equipment equals more expenses. Working with a smaller menu can also ensure that your bartenders and kitchen staff arenât overwhelmed and can focus on creating high-quality food and drinks. As you draw in customers to your bar, you can tweak your menu based on what customers are ordering, what gets rave reviews, and what falls flat.
Once youâve determined what your bar will be serving, youâll need to talk with suppliers to get estimates of costs. As you approach opening day, youâll place your order with your selected suppliers.
Still stuck on your menu? Check out our tips for creating a great menu.
Purchase Your Equipment
Once youâve secured a location and have moved further into the process of building your bar, itâs time to think about the equipment and fixtures that you need. What your bar needs depends on the theme youâve selected and what youâll be serving, but some items you may consider include:
Bar & barstools
Benches
Tables & chairs
Industrial ovens & other kitchen equipment
Coolers, refrigerators & ice bins
Blenders & other bar equipment
Big-screen TVs
Sound system
Microphones & other audio equipment
Beer taps
After youâve leased, purchased, or built your building, itâs important to create a detailed layout of your business. You want to ensure that you have enough room for everything required to run your bar, while also leaving enough space for seating, a dance floor, and other features that will be important to your customers. As you grow your business and need to add or update equipment, consider equipment financing to make these expenses more manageable.
Lender
Borrowing Amount
Term
Interest/Factor Rate
Additional Fees
Next Steps
$2K – $5M
Varies
As low as 2%
Varies
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$5K – $500K
24 – 72 months
Starts at 5%
Yes
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Up to $250K
1 – 72 months
Starts at 5.49%
Varies
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Select Your POS System
Gone are the days when most businesses just needed a cash register or two for their customers. With the rising use of credit cards, debit cards, and mobile payments, businesses — especially bars — need a more advanced system for accepting payments.
A point of sale (POS) system is one of the most important pieces of equipment youâll need for your new bar. A POS system combines software and hardware to create a centralized point for business operations. Through this system, youâll be able to take orders and accept payments, but thatâs not all.
Some of the most advanced POS systems come with features beneficial to bars. This includes built-in tipping systems, inventory management that allows you to track your stock levels, and an open ticket system for creating bar tabs.
Your POS system plays an important role in your business, so itâs important that you know what to look for before making your purchase. Check out our top picks for POS systems for bars and nightclubs.
Lightspeed Restaurant
ShopKeep
Toast
TouchBistro
Breadcrumb
Lightspeed Restaurant
ShopKeep
Toast
TouchBistro
Breadcrumb POS by Upserve
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Monthly fee
$69+
Get a quote
$79+
$69+
$99+
Cloud-based or Locally Installed
Cloud-based
Hybrid
Cloud-based
Locally installed
Cloud-based
Compatible credit card processors
Cayan or Mercury in US; iZettle in Europe
Shopkeep Payments & some others;Â contact your processor to see if they are supported
Toast only
TouchBistro Payments, Square, PayPal, Moneris, Cayan, Chase Paymentech & more
Upserve Payments only
Business size
Small to medium
Small to medium
Small to large
Small to medium
Small to large
Hire Employees
To make sure your bar is a success, you need to have the right employees working for you. If you havenât done so already, you need to apply for an Employer Identification Number for tax purposes. Next, you need to determine how many employees you need and what their roles will be in your business.
Youâll need at least one bartender that prepares and serves drinks in your bar. You will need to add additional bartenders based on the number of bar areas you have in your business, as well as the number of customers you have to serve.
If your bar will serve any type of food, you will also need a kitchen staff. This includes at least one cook, but you may also need prep cooks, dishwashers, and other staff as your business grows.
Youâll also need servers to distribute food or pass out drinks to customers not seated at the bar. The number of servers you have is based on the size of your bar and how busy it gets.
While your servers may be able to handle cleaning tables at first, as your business grows, you may want to add a busser or two, who are responsible for cleaning off tables for new customers.
You may also require additional staff. For example, you may hire a doorman that checks IDs before customers enter the door. A security guard may also be a staff member you hire to handle tempers that flare from customers whoâve had one too many.
You also need at least one manager to oversee the staff. A managerâs role may include hiring employees, firing employees, training, making schedules, and making sure that all staff members are doing their jobs properly.
Before you start seeking job applicants, make sure to create an in-house organizational chart to know exactly who you need to hire. You also need to do your research to figure out what salaries you will offer, as well as any benefits.
Unsure of where to hire new employees? You have a few options. First, post a job ad on online job boards or classified ads to find potential employees. This is an inexpensive (or even free) way to find candidates.
You can also ask for referrals. If you know someone in the industry, ask if they have any new hires to recommend. Donât know anyone in the industry? Ask other colleagues, family, and friends for recommendations.
Bolster Your Web Presence
After completing all of these steps, youâll be that much closer to opening your bar. However, you want to make sure to spread the word about your business, and thereâs no better way to do that than with the internet.
One of the easiest ways to get the word out about your business is through social media. Facebook, Instagram, and Twitter are just a few of the ways you can reach your target audience, and Yelp For Business is a must. Best of all, these accounts are free to use. As you grow, you may consider moving past the free advertising you get through your posts and pictures and invest in advertising on these social platforms.
You also need a good website. Keep your barâs theme in mind when you design your site. Make sure that your website reflects the image you want to project. There are many small business website builders you can look into if you want to create your website yourself. These make it easy for you to create a professional website with no prior web design experience required.
Service
Pricing
Hosted or Licensed
Templates & Themes
Compatible Credit Card Processors
Next Steps
$14 – $179/month
Hosted
Excellent
Many
Go to Site
Free – $29.90/month
Web-Hosted
Excellent
Many
Go to Site
Free – $25/month
Web-Hosted
Average
Many
Go to Site
$0/month
Hosted
Good
Square Payments
Go to Site
Make sure that you include your address and phone number on your website. Information about your bar including dress code and hours of operation are also extremely useful for customers. You can also include your menu, photos of your establishment and patrons, and news and updates on your website.
Also, remember that word-of-mouth is one of the best forms of advertising for a bar. If your customers love your drinks, food, service, and atmosphere, theyâll tell others. If they dislike your bar, theyâll also tell others ⦠who will make sure to avoid your establishment. Whether your bar is brand new on the block or youâve been in business for some time, keep customer satisfaction high so that customers online and off will have nothing but positive reviews for your business.
Final Thoughts
As you can see, creating a bar where everyone gathers to have a great time takes a lot of hard work. But just as Theodore Roosevelt said, âNothing in the world is worth having or worth doing unless it means effort, pain, difficulty.â Running your own bar means planning, budgeting, and always being ready for growth. While your bar wonât make you an overnight millionaire, you can become a successful entrepreneur with this potentially-lucrative venture if you put in the work.
The post Want To Open Your Own Bar? Top Tips To Get You Started appeared first on Merchant Maverick.
Often, when people think of starting a successful business, they envision high-profile clients signing big checks. But other aspiring entrepreneurs know it makes more sense to think in dollars and centsâ¦and weâre not talking about chump change, here. What weâre talking about is starting a lucrative vending machine business.
Vending machines are everywhere: hospitals, schools, office buildings, malls, and shopping centers. And each year, the vending machine industry brings in billions of dollars in revenue. The great news is you can get in on this profitable venture, whether you have previous business experience or youâre new to the game. All it takes is a little know-how, the right strategy, and one of the most critical pieces of the puzzle: financing.
In this post, weâll explore starting and financing your vending machine business. Weâll review the ins and outs of the industry, discuss two ways you can start your business, cover the benefits and drawbacks to vending machine businesses, and, of course, talk about how to get the financing you need. Read on to learn more and take the first steps toward launching your successful vending business.
How Vending Machine Businesses Work
We all know how vending machines work from the consumer end of thing — if youâre hungry or thirsty, insert a dollar, some change, or even a credit or debit card to get an instant snack or beverage. Easy!
But, once the machine has your money, where does it go? Most of the money goes directly to the vending machine owner.
The vending machine owner enters into contracts with other businesses. These contracts include details like the commission that will be paid to the business owners in exchange for providing space for the machine.
Vending machines can be used almost anywhere, including but not limited to:
Hospitals
Shopping Centers & Malls
Apartment Complexes
Laundromats
Hotels
Schools
Airports
After the machines have been installed, it is the responsibility of the vending machine owner to keep each machine stocked and in working order. Money made from the machines is used to purchase additional inventory, cover maintenance costs, expand the business, and pay business owners per the agreed-upon rate in the contract. After all those expenses are covered, the remaining funds are profits for the vending machine owner.
Pros & Cons Of Vending Machine Businesses
While owning a vending machine business certainly has its benefits, there are some drawbacks to note as well. Letâs fully explore the pros and cons of owning your own vending machine business to help you evaluate whether itâs the right endeavor for you.
Pros
Flexibility
One of the best things about owning a vending machine business is the flexibility it provides. You donât have to always be on the clock making sure things are getting done. Simply monitor your machines (even easier when you have the ability to do so remotely) and refill stock or perform maintenance as needed. You donât have to worry about monitoring employees, keeping a watchful eye on your business 24/7, or devoting your entire life to your business. A vending machine business lets you bring in income while still allowing you to focus on family, hobbies, and other business ventures.
Lower Cost Than Other Businesses
Typically, when you start a new business, there are many expenses to consider. You have to find commercial space to rent, lease, or purchase. You have to hire employees. The list goes on. With a vending machine business, you can bypass many of these costs. Sure, you have to purchase your vending machines, keep inventory on hand, pay maintenance costs, and possibly hire an employee to restock your machines. But compared to other businesses, the vending machine business model has extremely low overhead.
Tried-and-True Business Model
In this business, youâre not bringing a risky new product to market that could possibly fail. Youâre not operating an overly complicated business that requires expertise and a business degree. Youâre using a tried-and-true business model that has been proven to work over decades. Of course, you do have to have a strategy, and you do have to sell yourself and your business to proprietors, but anyone can get started, no matter your previous experience.
Cons
Waiting For Profits
Even though the vending industry rakes in billions of dollars each year, youâre not going to become an overnight millionaire. In some cases, it could take a year or longer to begin seeing profit from your machines. Itâs important to go into the business with realistic expectations, a solid strategy, and plenty of patience.
Some Expenses Involved
Even though itâs less expensive to get into the vending machine market than other industries, there are some costs involved. To get started, you have to invest in at least one vending machine. An older, used machine may cost as low as $1,200. A new machine with all the bells and whistles might run you $10,000 or more. The more machines you plan to have, the more expensive it will be to get started.
Youâll also have operating costs, primarily inventory. You can save money by working with a vendor or even buying goods in bulk from big box stores, but this is an ongoing expense that requires capital.
If you plan to expand your business, you face additional costs. This includes hiring an employee or two to keep your machines stocked, purchasing a company vehicle to use for restocking, and upgrading or adding new machines.
While it is possible to start slowly using out-of-pocket funds, most new business owners will need a financial helping hand. This is where loans and other financial products come into play — something we will discuss in more detail a little later.
Two Ways To Start A Vending Machine Business
Does the idea of owning your own vending machine business still appeal to you? If so, itâs important to understand the two ways you can start your business: starting from scratch or buying a pre-existing business.
Option #1: Start From Scratch
The first option for starting your vending machine business is to start from scratch. This requires a little more work in the beginning because you have to scout locations and enter into contracts with other business owners.
Begin by traveling around your area to scout out the best locations for your machines. Strategic vending machine placement is critical to making your business a success. Vending machines should be placed in high-traffic areas where they will be most useful — for example, a coffee vending machine in an office building or a vending machine that dispenses detergent and fabric softener at the local laundromat.
Once locations have been scouted, youâll work out a contract with the business owner. This allows you to place your vending machines in their place of business at a cost — usually 10% to 20% of your gross sales.
After your locations are mapped out, itâs time to purchase your machines. Only take this step after you figure out locations and what type of machines best fulfill your needs.
Many vending machine business owners invest in machines equipped with credit card readers. Although this equipment is more expensive, these machines have advantages over traditional machines that only accept cash. One of the primary advantages, of course, is that youâll have access to more customers. Fewer people are carrying cash, so these systems allow them to purchase your merchandise with credit cards, debit cards, or their smartphones. According to Vending Market Watch, consumers spend 32% more when paying with a card versus paying with cash.
Not only is your potential for profits much higher, but these advanced machines come equipped with remote monitoring systems that allow you to keep track of sales, check your inventory, and monitor maintenance needs. This saves you the hassle of having to frequently visit each location in person and helps you ensure your machines are fully stocked and in working order from the comfort of your home or office.
The final step is to make sure that you always keep your machines stocked and well-maintained. If your machine is out of order or out of items, you wonât make money. Evaluate what products are selling well and what items are flopping to maximize your profits.
One last thing to note is that you should always understand the rules and regulations in your area. Laws surrounding vending machines vary by state, so do your research online or contact your local chamber of commerce to learn more about local regulations before diving headfirst into your business.
Option #2: Buy A Pre-Existing Business
The second option is to buy a pre-existing business. Instead of doing the initial setup work yourself, you take over an existing business that already has equipment and, in most cases, locations secured with contracts.
The obvious advantage is that this automatically gives you a more turn-key operation. A major drawback is that this is often the most expensive option. After all, you arenât just buying the equipment and inventory — youâre also taking over existing contracts.
If you choose this option, itâs best to have some business experience under your belt since you need to hit the ground running. Youâll also need to ensure you can secure the capital needed to purchase the business.
How To Finance Your Vending Machine Business
Whether youâre starting from the ground up or youâre in talks to purchase an existing business, thereâs one thing you need before you take the leap into entrepreneurship: money. Even if your business is already off the ground, youâre going to need additional capital to expand and boost your profits — capital that you can receive with a small business loan.
Starting A Vending Machine Business
Starting a vending machine business can be surprisingly low-cost. After all, you donât have to worry about paying for commercial space or utility bills. However, there are still startup costs associated with this type of business.
Some of the costs you may incur when starting your business include:
Equipment
Inventory
Vending Management System
Commercial vehicle used for restocking machines
Unfortunately, qualifying for traditional business financing options is difficult for startups. Many business loans, including those from banks, credit unions, and the Small Business Administration, have time in business and annual revenue requirements that you just wonât meet.
This doesnât mean youâre out of financing options. Instead, you can use a personal loan for business to cover startup costs.
With a personal loan for business, youâll use your personal credit score, income, and other information to prove your creditworthiness. Since this isnât a business loan, you donât have to worry about annual revenue, business credit score, or other requirements.
Recommended Option: LendingPoint Personal Loan
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Time in business: N/A
Business revenue: N/A
Personal credit score: 600 – 680
Personal income: $20,000
LendingPoint does not operate in Colorado, Connecticut, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Dakota, Rhode Island, South Carolina, Vermont, West Virginia, Wisconsin, and Wyoming
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Through LendingPoint, you can receive up to $25,000 as quickly as the next business day. Interest rates are between 15.49% and 30%. Your loan is repaid twice a month over terms of 24 to 48 months.
One of the advantages of LendingPoint is that you donât need a perfect credit score to qualify. These personal loans are designed for fair-credit borrowers. To qualify, you must:
Be at least 18 years old
Have annual income of at least $20,000
Have a verifiable bank account
Have a personal credit score of at least 600
Live in one of the 34 states where LendingPoint operates
Unsure if you qualify? Check out our list of the best free credit score sites to review your credit score. Then, head over to our LendingPoint review to learn more about receiving a personal loan.
Purchasing A Vending Machine Business
If youâve decided that purchasing an existing vending machine business is right for you, the next step is getting the capital you need to acquire the business. Unfortunately, if you donât already have an existing business, qualifying for a business loan can be difficult.
As a startup, you may qualify for startup loans or other types of business financing. Learn more about how to get a business acquisition loan.
However, personal loans used for business expenses are also an option. Just as we discussed above, you can use your personal information to qualify for financing to acquire an existing business.
Our previous recommendation, LendingPoint, can only provide up to $25,000. If you need more capital, consider Lending Club personal loans.
Recommended Option: Lending Club Personal Loans
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Time in business: N/A
Business revenue: N/A
Personal credit score: 600
Credit history: 3 years
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Lending Club issues personal loans up to $40,000 to qualified borrowers. APRs range from 6.95% and 35.89% and are based on your credit score and history and the amount and term of your loan. There are no prepayment penalties. Repayment terms of up to 60 months are available.
To qualify for a Lending Club personal loan, you must:
Be at least 18 years old
Have a verifiable bank account
Be a U.S. citizen, permanent resident, or live in the U.S. on a long-term visa
Have a credit score of 600 or above
Ready to learn more? Check out our Lending Club personal loans review for more information.
Equipment Purchasing
As your business grows, youâll want to add more vending machines to your lineup. You may also have to replace broken or outdated machines to maximize revenues. Unfortunately, vending machines donât come cheap. While a used, basic model may cost just over $1,000, newer machines run several thousand dollars apiece. Though this seems like a big investment, you could easily increase your profits and see a big return with more expensive specialty machines or equipment that comes with credit card readers.
Another piece of equipment that may be critical to your business is a commercial vehicle. A van, car, or truck that is used to drive to your locations and restock or manage your machines may be something you consider purchasing as your business grows.
When it comes to buying equipment, thereâs one option that stands out from the rest: equipment financing. Just as the name suggests, this type of small business loan is used to purchase equipment, breaking down huge price tags into smaller, more manageable payments.
With equipment financing, you have two options: equipment loans and equipment leases. With a loan, youâll pay a down payment that is typically 10% to 20% of the cost of the equipment. Youâll take immediate possession of the equipment, and youâll pay your lender on a weekly or monthly basis over a set period of time. Once youâve fully repaid the loan (plus interest), the equipment belongs to you.
With a lease, youâll also pay a down payment and take possession of the equipment. However, your lease period will be for a shorter period of time — usually 2 to 3 years. Similar to loans, youâll make regularly scheduled payments to the lender. Once your lease is over, you can sign another lease for new equipment. Some lenders even allow you to pay the remaining balance at the end of your lease to take ownership of the equipment. Leasing may be a good option if you plan to upgrade equipment frequently. However, this could be the more expensive option over the long term.
Recommended Option: Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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If you need equipment financing, Lendio has options. This isnât a direct lender. Rather, it is a loan aggregator that connects you with its network of over 75 lenders. Whatâs great about Lendio is that you can compare offers from multiple lenders with just one application.
Lendio offers $5,000 to $5 million for the purchase of equipment. Terms are between 1 to 5 years with rates starting at 7.5%.
To qualify for equipment financing through Lendioâs network, you must have the following:
A time in business of at least 12 months
A credit score of 650 or above
At least $50,000 in annual revenue
Credit scores below 650 may be accepted with proof of solid cash flow and revenue from the last 3 to 6 months.
Through Lendio, you can also apply for other types of financing including Small Business Administration loans, business credit cards, short-term loans, and lines of credit. Check out our Lendio review to learn more.
Inventory Purchasing
One of the few ongoing expenses youâll have in your vending machine business is inventory. Itâs your responsibility to keep your machines well-stocked at all times, so youâll need to have inventory on-hand to keep your machines full.
Sometimes, incoming cash flow has slowed or you may need more inventory than usual due to an increase in sales. Itâs not uncommon to fall a little short financially from time to time, but when this occurs, you can be prepared with a business credit card or a line of credit.
Business Credit Card
A business credit card works just like a personal credit card. The issuer of the card sets a limit. You can make multiple purchases up to and including the credit limit online, at retail stores or with vendors that accept credit cards. Each month, youâll make a payment that is applied toward your balance plus the interest charged by the lender. As you pay down your balance, funds will become available for you to use again.
Recommended Option: Chase Ink Unlimited
Chase Ink Business Unlimited
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Annual Fee:
$0
Purchase APR:
15.24% – 21.24%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 on purchases in the first 3 months
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: 0% for the first 12 months
Foreign transaction fee: 3%
Rewards:Â
Unlimited 1.5% cash back rewards on all purchases
Notable perks & benefits:
Employee cards at no additional cost
Travel and purchase coverage
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If you want to go with a business credit card, Chase Ink Unlimited is available for borrowers with excellent credit.
The Chase Ink Unlimited card comes with a 0% introductory APR for 12 months. After the introductory period, the card has a variable interest rate of 15.24% to 21.24%. This card does not have an annual fee.
As a new Chase Ink Unlimited cardholder, youâll receive $500 cash back if you spend $3,000 within the first 3 months of opening your account. But the rewards donât stop there. Youâll receive unlimited 1.5% cash back for every business purchase.
To qualify, the recommended credit score is 740 to 850. Learn more by reading our Chase Ink Unlimited review.
Business Line Of Credit
A business line of credit is very similar to a credit card and can be a great option for purchasing inventory. A lender will set a credit limit based on your creditworthiness or the performance of your business. Instead of using a card, however, youâll initiate draws from your line of credit. Funds will then be transferred to your business bank account, usually within 1 to 3 business days. Lenders charge fees and/or interest on the portion of funds youâve borrowed. As you pay down your outstanding balance, funds become available to withdraw again.
Both credit cards and lines of credit provide you with on-demand funding, ideal for those times when you need to purchase inventory but come up a little short financially.
Recommended Option: Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
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Through Fundbox, you can receive a line of credit up to $100,000 to cover inventory and other business expenses.
Fundbox offers pricing thatâs easy to understand. With each draw, youâll pay a one-time fee. Fees start at just 4.66% of the amount drawn. If you repay early, all remaining fees are waived. Payments are made weekly and are spread out over 12 or 24 weeks.
Fundbox looks beyond your personal credit score during its approval process. The lender evaluates the performance of your business to determine whether you qualify for a line of credit.
Requirements to qualify for a Fundbox line of credit are minimal. You only need:
A business based in the United States
A business checking account
At least $50,000 in annual revenue
2 months of activityin supported accounting software OR 3 months of business bank statements
To learn more and determine if this product is right for your business, check out our Fundbox review.
Final Thoughts
Starting your own vending machine business can be a very lucrative venture with the right strategy in place. This includes calculating the cost of owning and operating your business, doing your research, and getting the right financing.
Understand the potential expenses youâll encounter, read up on your local laws, then check out our Beginnerâs Guide to Small Business Loans to explore more financing options available to you.
The post Starting And Financing A Vending Machine Business appeared first on Merchant Maverick.
While it’s nice to have choices, sometimes it can be difficult to narrow your search down to a single, best option. It’s no different when you’re looking for business financing. SmartBiz and National Business Capital both promise to save time and headaches by allowing you to effectively apply to multiple lenders with a single application. Note that neither directly originates loans.
But while they’re both loan aggregator services, there are some notable differences between the two that may help you decide between them.
SmartBiz is heavily specialized toward SBA loans. If you aren’t familiar, the Small Business Administration has a number of programs wherein they’ll guarantee a portion of a business loan for qualified applicants. This can help you access better rates and terms than you may otherwise be able to get without the SBA guarantee. The tradeoff is a longer and more complex application, as well as a longer time to funding. SmartBiz helps you navigate through the red tape while also connecting you to SBA-approved lenders.
National Business Capital can also connect you with SBA loans, but they’re a bit less specialized, also offering unsecured small business loans, lines of credit, merchant cash advances, equipment financing, and startup business funding.
So in this battle of depth vs. breadth, which lender is the better middle man?
SmartBiz
National Business Capital
2 years
Time In Business
6 months
N/A
Minimum Sales
$15K per month
650 (personal) 150 (business)
Minimum Credit Score
N/A
Qualifying
Winner: National Business Capital
To qualify for an SBA loan through SmartBiz, you’ll need to have been in business for two years, and have a personal credit score over 650 and a business credit score of 150. You must be a US citizen or legal permanent resident. You also can’t have defaulted on any government-backed loans, have any tax liens, or had a bankruptcy or foreclosure within the last three years.
Since they aren’t dealing exclusively with SBA loans, it’s a lot easier to qualify for National Business Capital’s loans. You’ll only need to have been in business for 6 months and take in at least $15,000 per month in revenue. There are no explicit credit requirements. Even if you don’t meet that benchmark, National Business Capital may still be able to work with you through one of their alternative programs. National Business Capital can work with businesses in all 50 states, Puerto Rico, Canada, and the U.K.
Overall, it’s a lot easier to meet the minimum qualifications of National Business Capital, but if you’re looking for an SBA loan you’ll have to meet guidelines similar to those of SmartBiz.
Fees
Winner: SmartBiz
Since we’re talking about third parties, you’re going to want to know what the convenience they offer will cost you.
SmartBiz charges two fees, beyond those charged by those normally associated with an SBA loan (0 – 3.75 percent guarantee fee and around a $450 fee from the lender): a one-time referral fee, and a one-time packaging fee. Each can cost up to 2 percent of the loan’s amount.
National Business Capital doesn’t divulge much information about their fees, and it’s difficult to get a straight answer from a rep when you ask about them.
Loan Terms
Winner: Tie
The SBA itself sets the acceptable terms for SBA loans, so you won’t find a ton of variation between lenders. Since SmartBiz deals exclusively in SBA loans, there’s not much to compare here. If you’re looking for a non-SBA loan or other financial product, National Business Capital can offer that.
Application Process
Winner: SmartBiz
Both SmartBiz and National Business Capital promise an easy, simplified application process, and both companies deliver. I’m giving SmartBiz the nod here for one reason: their screening process will let you know ahead of time whether or not you’re qualified for their service. This saves you the time of filling out an application only to be rejected down the road. Since National Business Capital is less specialized, they’re more likely to be able to help you, but in rare cases, customers may be well into the process before they discover that NBC can’t help them.
Time To Funding
Winner: National Business Capital
SBA loans can only be funded so quickly. If you need money immediately, SmartBiz won’t be able to do much for you. On the other hand, National Business Capital’s versatility allows them to offer faster products, often within the span of a couple days.
Transparency
Winner: SmartBiz
When it comes to online lenders–and let’s be honest, the financial sector in general–transparency is in short supply. Signing up for a loan is risky. Even submitting your basic information can lead to a future full of annoying cold calls. If possible, you’ll want to know what you’re getting into before you even make contact.
SmartBiz lays out most of what you need to know in a convenient FAQ on an easily searchable website.
National Business Capital, on the other hand, throws around lot of general information about financial products but comes up short on actual rates and fees. There are some calculators you can play with, but they’re not necessarily representative of the terms you’ll be offered.
Customer Service
Winner: SmartBiz
Customer service is usually one of the most divisive topics when it comes to alternative lenders. Satisfied customers will usually be very happy with the service they received, while angry customers will describe it in the most uncharitable terms.
While both companies seem to suffer from some communication issues, overall SmartBiz’s customers have fewer beefs with customer service.
Negative Reviews & Complaints
Winner: Tie
Both SmartBiz and National Business Capital receive generally positive reviews from customers and other review sites, usually within a point or two of each other. Complaints about both companies are typical for alternative lenders, including fees, rejections, and communication problems.
Complaints specific to SmartBiz include unhappiness with the amount of paperwork customers had to fill out. For National Business Capital, a common theme was aggressive marketing calls.
Positive Reviews & Testimonials
Winner: Tie
You’ll find no shortage of satisfied customers for both companies.
Fans of SmartBiz liked the personal touch offered by their representative, the relative speed (for SBA loans) of funding, and the company’s transparency.
Happy National Business Capital customers appreciated the wide variety of options offered, the customer service, and the quick turnaround time on their loans.
And The Overall Winner Is…
Specialization has its advantages. When it comes to a third party service for SBA loans, it’s hard to do better than SmartBiz. They take a long, complex process and make it a little less grueling for small businesses while offering a refreshing level of transparency.
Of course, if you’re looking for something other than SBA loans, National Business Capital can help you in ways SmartBiz simply can’t. This is especially relevant if time is a factor.
If you want a deeper look at SmartBiz or National Business Capital, check out our comprehensive reviews.
Review
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Must be in business at least 2 years.
Must have a personal credit score of 650 or above.
Must have a business credit score of 150 or above.
Borrower requirements (click to expand)
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It’s hard to imagine modern life without the benefit of the work done by the HVAC industry. HVAC companies (HVAC refers to heating, ventilation and air conditioning) are tasked with keeping us warm in the winter, cool in the summer, and breathing safely as we live our lives in the archipelago of enclosed spaces that comprises our indoor universe.
With the economy in a period of expansion, demand for new construction has risen, and where the construction industry goes, so goes HVAC work. After all, these new offices, homes, and transportation systems aren’t going to keep themselves ventilated and comfortable.
As with any industry, HVAC companies have their own particular financing needs. There’s no shortage of loan products out there, offered by banks, online lenders, credit card issuers, and even the federal government. But you probably knew that already. The question most relevant to you is: Which types of loans best fit the specific financing needs you’re going to have in the course of operating your HVAC business?
That’s where Merchant Maverick comes in. We’ll help make sense of the lending market for you and direct you to the loan products that best fit your specific needs. Let’s get down to the nitty-gritty and delve into how to get a business loan for an HVAC company.
Financing Need
Best Loan Type
Recommended Lender
Marketing & Advertising
Medium-Term Loan
Fundation
Equipment Purchasing
Equipment Loan
Lendio
Business Expansion
SBA Loan
SmartBiz
Emergency Funds
Business Credit Card
Chase Ink Business Unlimited
Working Capital
Short-Term Loan
PayPal LoanBuilder
Covering Payroll
Line Of Credit
OnDeck
Loans For Marketing & Advertising
Whether your HVAC company is just finding its legs and seeking to generate new leads or is established but working to expand, marketing and advertising are integral to an HVAC business’s success. Of course, such a campaign costs money, and the funds need to come from somewhere.
While we’re not here to tell you how to run your marketing campaign, here’s a quick tip: Reach out to people just before summer and winter begin. It’s when your services will be most in demand — for obvious reasons!
Medium-Term Loans
A medium-term loan is an installment loan (a loan that is repaid periodically over a defined period of time with interest) with a term length of between two and five years. You can typically borrow more with a medium-term loan, but if your anticipated marketing campaign won’t cost that much, a short-term loan would be appropriate.
A medium-term loan can obviously be used for any business purpose. However, since you should be able to more accurately estimate the cost of your marketing campaign than many other types of business expenses, a loan in which you borrow a specific amount of money is particularly appropriate here.
Recommended Option: Fundation
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Must be in business at least 2 years and make at least $100,000 annually.
Must have a personal credit score of 660 or above.
Borrower requirements (click to expand)
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Founded in 2011, Fundation has since become one of the leading “alternative” lenders, boasting competitive rates, a solid reputation, and fixed-rate pricing (the interest rate will not increase over the life of the loan). Fundation’s term loans max out at $500K; accordingly, Fundation’s borrower qualifications are stricter than those of many online lenders. Fundation also offers lines of credit of up to $100K.
Fundation’s installment loans are offered with terms of one to four years and are fixed-rate, meaning the assigned interest rate will remain unchanged over the life of the loan. Additionally, Fundation sports a rapid time-to-funding, typically between two and seven days.
Loans For Equipment Purchasing
The HVAC industry relies on heavy equipment — the bigger the building, the heavier the equipment. Of course, these heating and cooling systems don’t come cheap. While any loan products can be used to cover the cost of purchasing HVAC equipment, there’s one type of loan tailored for this purpose: Equipment loans.
Equipment Loans
In many ways, an equipment loan resembles a traditional installment loan — you’ll be paying down the principal plus interest with monthly payments. The advantage of the equipment loan is that the equipment you purchase with the funds serves as collateral. Equipment loans are therefore secured loans, and secured loans typically have better rates and terms than their unsecured counterparts.
With an equipment loan, the lender usually covers most of the cost of purchasing the equipment, leaving around 10% to 20% to be covered by you. On occasion, however, the lender might be willing to cover the entire cost.
Equipment Leases
An equipment lease is another means of equipment financing. Such leases fall into one of two categories: Capital leases and operating leases.
With a capital lease, you are considered to be the owner of the equipment in question, so the arrangement resembles a loan in many ways. You make your monthly payments throughout the course of the lease. Afterward, you pay a small residual to close your account.
An operating lease lets you essentially rent the equipment during the lease, making monthly payments. When the lease ends, you can either return the equipment or buy it at fair market value, giving you a nice degree of flexibility.
See our article on equipment loans vs equipment leases for more information.
Recommended Option: Lendio
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Must be in business at least 6 months with a revenue of $10,000 per month.
Must have a personal credit score of 550 or above.
Borrower requirements (click to expand)
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Lendio isn’t your typical lender. In fact, Lendio isn’t a direct lender at all. Lendio is a loan aggregator, which means that you submit a single loan application which Lendio then passes on to multiple lenders, saving you time and effort. Within about three days of submitting your application, you should be fielding multiple equipment financing offers.
Through Lendio, you can find an equipment loan as large as $5 million, with loan terms ranging from one to five years and interest rates as low as 7.5% for highly qualified borrowers.
Loans For Business Expansion
Let’s say your HVAC company has been thriving and is ready to expand to meet the challenges of our glorious future of relentless climate extremes. Without an infusion of cash, however, your expansion plans may not be feasible. If you’re looking for a sizable loan at a reasonable interest rate, consider an SBA loan.
SBA Loans
The Small Business Administration (SBA) is an agency of the federal government meant to assist small businesses in obtaining funding. For the most part, the SBA does not lend directly to businesses. Rather, it guarantees up to 85% of loans offered by SBA-approved lenders. These lenders are known as intermediaries.
While SBA loans feature competitive rates and terms, be warned that borrower requirements tend to be rather stringent.
Here’s a rundown of four of the main SBA loan programs with links to articles describing the programs in greater detail.
Loan Program
Description
More
7(a) Loans
Small business loans that can be used for many many business purchases, such as working capital, business expansion, and equipment, inventory, and real estate purchasing.
Review
Microloans
Small loans, with a maximum of $50,000, which can be used for working capital, inventory, equipment, or other business projects.
Review
CDC/504 Loans
Large loans used to acquire fixed assets such as real estate or equipment. 504 Loans are offered in partnership with Community Development Companies (CDCs) and banks.
Review
Disaster Loans
Loans used to rebuild or maintain business following a disaster.Â
Review
Recommended Option: SmartBiz
Review
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Must be in business at least 2 years.
Must have a personal credit score of 650 or above.
Must have a business credit score of 150 or above.
Borrower requirements (click to expand)
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There is no shortage of SBA-approved lenders out there. However, if you’re looking to grow your HVAC business with an SBA loan, you might find the complex SBA application process to be intimidating and fraught with peril. The beauty of SmartBiz is that the company helps simplify and streamline the application process for you so that you can make sense of it all.
SmartBiz is not a lender. Describing themselves as the “white knight in small business lending,” SmartBiz will match you with an SBA-approved lender after helping you through the onerous application process. You’ll need to have at least two years of business history behind you and a personal credit score of at least 650, but if you meet these and other requirements, you can get an SBA-backed loan of up to $350,000 with interest rates between 8% and 9%. Not too shabby!
Loans For Emergency Funds
Let’s say the construction industry takes a downturn, leaving you with less business. You still have employees to pay and expenses to cover. How should a company in your position deal with unexpected cash flow problems? When you need a flexible funding solution you can draw from on an as-needed basis, consider a business credit card.
Business Credit Cards
As business credit cards tend to feature higher interest rates than business loans, they aren’t an ideal funding mechanism in many instances. But when unexpected situations arise and you need a stop-gap measure to temporarily plug some funding holes, there’s nothing like the ease and convenience of a business credit card. With the right card, you can cover emergencies while earning rewards and/or cash back along the way.
A good credit history will help you get lower interest rates and a higher credit limit. However, even with a less-than-stellar credit history, there are options available to you, including secured credit cards, which require a security deposit.
If you’re unsure of your credit score, whatever you do, don’t pay for a credit check. Here are some websites that let you check your credit score for free.
Recommended Option: Chase Ink Business Unlimited
Chase Ink Business Unlimited
Apply NowÂ
Annual Fee:
$0
Purchase APR:
15.24% – 21.24%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 on purchases in the first 3 months
Purchase intro APR: 0% APR for the first 12 months
Balance transfer intro APR: 0% APR for the first 12 months
Foreign transaction fee: 3%
Rewards:Â
Unlimited 1.5% cash back rewards on all purchases
Notable perks & benefits:
Employee cards at no additional cost
Travel and purchase coverage
More card details (click to expand)
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The Chase Ink Business Unlimited card is a great way to cover those unexpected expenses while earning 1.5% cash back to boot. If you’re using a credit card to cover emergencies, you’re probably not looking for a card with rotating cash back spending categories or lavish travel benefits. The Ink Business Unlimited comes without these extraneous distractions so you can focus on getting your HVAC business out of a jam while earning cash back on everything you buy.
Keep in mind that you’ll need good to excellent credit to qualify for the Ink Business Unlimited. If your credit doesn’t fit that description, check out these options for business owners with poor credit.
Loans For Working Capital
Working capital refers to the money you use to keep your business running on a day-to-day basis. When times are good, your cash flow should be sufficient to keep your company running smoothly. The problem is that without extraordinary luck, times will not always be good, particularly in a field prone to seasonal slow-downs like the HVAC industry.
When seeking a loan for this purpose, you’ll want something that affords you a high degree of flexibility in terms of what you can spend your funds on. For this reason, a short-term loan may be worth your consideration.
Short-Term Loans
A short-term loan is an installment loan that must be repaid within 12 months or less. Payments must be made on a weekly or even daily basis and are normally deducted automatically from your business account. If approved, you can usually get your funds within a few days. Short-term loans are all about fast money, both in terms of getting the money and paying it back.
Instead of charging interest on what you borrow, short-term lenders charge you a flat fee known as a factor rate. This factor rate is a multiplier that determines the lenderâs fee. I’ll give an example: Take out a $50,000 loan at a 1.2 factor rate, and you’ll be paying $60K for the loan over the agreed-upon term length.
Recommended Option: PayPal LoanBuilder
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Must be in business at least 9 months with a revenue of $42,000 per year.
Must have a personal credit score of 550 or above.
Borrower requirements (click to expand)
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PayPal’s LoanBuilder is what the name suggests. You essentially build your own loan by customizing its elements to fit your particular situation. The loans offered range from $5K to $500K and term lengths run from 13 to 52 weeks.
LoanBuilder’s lender requirements aren’t terribly strict. Your business must have been running for at least 9 months. Your annual revenue must be at least $42,000 and your personal credit score must be at least 550. As ever, your credit history and your company’s overall health will determine your maximum borrowing amount and your rates.
Loans For Covering Payroll
Heating and cooling systems don’t install themselves. To ensure that our apartments, workplaces, and shopping centers don’t become unlivable nasty hellscapes, an HVAC business needs workers. Workers need to be hired, trained, and paid, all of which costs money.
If you need help hiring new employees (or paying the ones you already have), consider a line of credit.
Lines Of Credit
A line of credit operates on the same principle as a credit card. Instead of receiving a lump sum of dinero all at once, you’re given a credit line you can draw from whenever you feel the need. As with a credit card, you’ll have a credit limit to contend with, and you pay fees and interest only on the funds you use, not the total amount of the line of credit.
Recommended Option: OnDeck
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Must be in business at least 12 months with a revenue of $100,000 per year.
Must have a personal credit score of 500 or above.
Must not be in one of OnDeck’s restricted industries.
Borrower requirements (click to expand)
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If you need funding quickly, consider a line of credit from OnDeck. Approval should come in a matter of days, and the credit requirements are not particularly strict. Your credit line can run anywhere from $6K to $100K.
One thing to keep in mind about OnDeck’s lines of credit is that they are a short-term funding mechanism, lasting only about 6 months.
What To Consider When Choosing A Lender
For business owners seeking a loan, there has never been a wider array of funding options. To help narrow down your search, consider the following questions.
Why Do I Need A Loan?
Before you can even start looking at particular options, you need to be certain of the purpose of your loan. Whether you’re looking to expand your business or purchase new equipment, only by defining your precise need can you select a loan product that fits what you seek to accomplish. Otherwise, you’re flying blind without any point of reference.
No one lender or loan makes sense for every business need under the sun. Know what it is that you need and shop accordingly!
Am I Qualified?
There’s no need to examine a lender in detail if you won’t qualify for its loans in the first place. Try to find and examine a lender’s minimum qualifications before going through the terms and fees with a fine-toothed comb.
Vendors of business loans nearly always inquire about your time in business, credit rating, and revenue. On each of these measures, the lender may have a strict cutoff point where, if you don’t meet the benchmark, you don’t qualify. Alternately, they may just use this information to determine your rates. Either way, it’s information you’ll need to provide.
Do The Rates & Terms Meet My Needs?
It’s obviously important to consider a lender’s rates and terms when deciding on what loan to pursue. Make sure you can afford the funding; nothing will give you nightmares like taking out a loan you can’t repay. However, a lender’s reputation and business practices are equally important. To get a sense of just how a lender treats its customers, try to find user feedback on the company in question wherever you can. Read enough reviews (we do business loan reviews, you know!) and borrower feedback and you’ll get a pretty good idea as to whether the lender is an honest broker or a predator fixing to bleed you dry.
What You Need To Apply For HVAC Business Loans
The number of documents you’ll have to round up depends on the lender. Naturally, you’ll need the basics —Â name, business name, address, telephone number, email address, social security number, and federal tax ID number. Many lenders will require much more, however. Here are some documents you should be prepared to submit, depending on the lender:
Business & Personal Credit Reports/Score
Business & Personal Bank Statements
Business & Personal Tax Returns
Profit & Loss Statements
Balance Sheets
Income Statements
Business Licenses
Business Owner Resumes
A Business Plan
For a more thorough look at how to apply for a business loan, read our in-depth take on business loan requirements.
Final Thoughts
Now more than ever, we need the HVAC industry at the top of its game. As I write this, wind-driven fires have spread dangerously smoky air over large parts of my tinder-dry home state of California, and proper indoor ventilation is literally the last line of defense for many in the affected areas.
When seeking a loan for your HVAC company, do your due diligence, explore all your options, and get your documents in order. This should set you up nicely for getting the loan that paves the way for your success.
The post Business Loans For HVAC Companies appeared first on Merchant Maverick.
