How to finance your vending machine

Once you have decided that a vending machine is right for you and the type that you feel would best serve your businesses needs it’s important to look at other issues. These namely surround the issue of the fine print in terms of how that machine is bought or leased.

Leasing tends to be the most popular way of acquiring a vending machine. Gone are the days where leased contracts become advantageous only to the supplier! Long and over inflated contracts are rare these days but it is always important to be fully acquainted with the facts before signing any lasting contract.

How does a lease work?

Once a decision has been made on the machine that suits your business needs best you need to think how long you would like your lease for. They range from one to six years in duration with the longer the lease resulting in lower costs. In short it is financially cheaper to take out a long lease as opposed to a shorter one. The most common length of vending machine hire is around the five year mark.

Once a decision has been made the company from which you lease will let you know how much it will cost. Payments are usually made quarterly in advance but you can pay monthly in some cases. This information will be passed on by a vending salesperson to the leasing company who will make a judgement on whether they will lease the machine. This decision will take into account your credit rating.

If your businesses has been running for less than three years or you have tested for a poor credit rating there is a good chance you may be turned down by the leasing company. However, if you are accepted and the machine is installed and working correctly you will be asked to sign a form to declare that it is working correctly and that you are happy with the machine before the lease begins in earnest.

Why leasing is good

Leasing is often seen as a tax efficient way of financing the vending machine in your business. Buying a new machine will mean that your money is being lost on a slowly depreciating piece of kit Leasing frees up your money for other areas of your business and the lease will be independent of any interest rate fluctuations. Leasing payments can also be taken out of taxable profits.

Vending machine upgrades

If you decide to upgrade your machine before your lease is up, this is possible. You could undertake a new agreement with a new finance company who will settle your remaining figure on your current contract and often offset that against the new machine that you have decided to hire. They often send a cheque for you to send to your current lease company to settle the outstanding amount. Here is a list of “Do’s” to consider when paying off the outstanding balance on your old machine.

Double check

It is important to check and check again the number of repayments left on your existing old contract. You may think you have fewer repayments than you actually do as some companies run a system of say 12 quarterly payments for three years. However, this may in actual fact equate to 13 or 14 payments if the company you originally hired from thought it would make the overall payments appear smaller.

Re-check that you understand fully the contract that you are about to sign, do not take verbal promises as gospel, make sure you have any issues ironed out before signing again.

Check with the salesperson how long they have been in the company this way you can double check any issues that may occur due to inexperience.

Rentals

The difference between a rental and a lease agreement is that the former is undertaken as an agreement with the vending company. Rentals are often for shorter durations and can be restricting and difficult to negotiate out of than lease agreements. Be aware of any small print as sometimes rental agreements state that should you wish to terminate the contract a similar machine cannot be hired from a rival vending company!

Rental agreements tend not to be fixed term and will end once you have given notice so it is worth carefully noting the end date of any contract you undertake.

Other pitfalls worth looking into include things called operating agreements. These mean that your supplier ties you in not only for the machine’s rental but also to the supplier for cleaning and re-stocking.

What are operating agreements?

These are agreements which cover the cleaning, filling, maintenance and cash from the machine they basically cover the overall running of your machine. This can include the following:

Management fee: This covers the staffing of the machine’s maintenance etc

Cup charge: This covers the cost of each cup used for each cup which is vended from the machine

Vending price: This is the amount that staff or perhaps customers will pay for each drink, this will include VAT. The cost per cup is exclusive of VAT and the difference between the two is often returned back to you.

Sometime vending companies offer a full service which means that the company will run, fill and service your machine in exchange for all the takings. For many businesses wishing not to make money out of their machine this can be a great deal.