Financing a Redbox Franchise

Getting funding to start a business is difficult and financing a Redbox franchise or other DVD kiosk rental company is no different.

When looking for financing, a bank is primarily concerned with your credit score and collateral.  The credit score should be in the 650 range.  Collateral is the assets both through the business and personally that the bank would take possession of should the loan go into default and they will sell to attempt to get their money back.  Banks loan against equipment like a DVD vending machine but since it’s a specialized piece of equipment unlike say a bulldozer which makes it more difficult to sell.  This means they will loan a smaller percentage against these types of machines.  This percentage will vary between lenders but expect to only borrow between 50 and 70 percent of the value of the unit. After researching used DVD kiosks and how quickly the DVDNow units depreciate, I can appreciate why as they do not hold their value very well.  The remainder of the collateral would need to be made up from personal collateral or additional cash.

While you cannot get a Redbox franchise there are other companies that make machines and access to movies.  On the upper end, DVDNow sells a unit with movies for around $25,000, which is a lot of money to come up with, which leaves someone to look for where to get funding.

The typical sources of funding a business come through the following five sources:

• Personal savings – The more you can put down personally the better as you have less money to pay back each month.

• Grants – There is very little money from grants to start a business and none for a vending business.

• Friends, family and fools – Many businesses have started with funding from these three and many friendships have been lost so proceed with caution.

• Credit cards – Are easier to get for small businesses than any other time than I have been aware of.  If you plan on keeping the balance on the card for a long period of time, be sure to look for a low interest rate card.

• Bank financing – What most people think of for acquiring funding when starting a business.  Make sure your credit score is good and put together a business plan.  There are free resources to help you prepare a business plan like Small Business Development Centers www.asbdc-us.org or SCORE

• Economic development loan funds – Hard to find but local agencies receive funds to lend to businesses to spur job creation and are typically not as hard to work with if you have credit score issues.  Businessloanfunds.com has a listing of these programs.

So there are several places for entrepreneurs to find funding to start their business.  While you won’t get financing for a redbox franchise since these types of franchises don’t exist, there are several DVD kiosk companies that you would need financing for.  Since you may be starting your first business be sure to utilize the free resources listed above to develop your business plan so you can get honest advice about the risks and rewards of starting this type of business.