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Asset Based Loan

Why Vending Companies have difficulty obtaining financing

Vending companies, companies that sell or place vending machines or Arcade machines have traditionally had a difficult time obtaining financing for the business.  What are the reasons Vending companies have difficulty obtaining financing?

One of the primary reasons Vending companies have always had more difficulty obtaining financing is that the collateral is less desired for several reasons.  The Collateral is less valuable, it has less value when it is being resold, and the collateral is often in many different locations, sometimes one or two dozen locations.

In the event of a default, if the collateral is to be recovered, it would be far more difficult to recover than with more conventional collateral that is located on the property of the borrower.  In some cases, it may not be possible to recover the collateral at all.  If the collateral is location in the physical location of another business, the other business owner may not want a third party repossession company on their premises to pick up assets located on their property.  It may hurt their business and look bad.  If a customer has to many assets from one Vendor and that Vendor goes Bankrupt, a company that comes by to pick up the collateral may suddenly show up one day to pick up many machines.   For instance if a bowling alley contracts for many machines with 1 Vendor, the bowling alley would not want a repo company to come by one day and pick up half of the Vending machines and Arcade machines.  That would significantly hurt the short term business of the bowling alley.

It would be far better for the bowling alley to use several vendors for vending and arcade.  If one Vendor has difficulty, the bowling alley, in this example would only lose a few of their pieces in the event the Vendor were to get into difficulty, and a few items could be easily replaced.