Expert: Mark Hanke - 2/7/2009

Question
Hello,
A friend of mine and I are about to start an ATM business but cannot decide whether it would be in our best interest to buy or lease the machines. If we lease the machines we technicaly do not "own" them.. and does that even matter?  What is your advice on this matter?

Answer
Hi -

I would be glad to help answer your question. Our company (Franklin ATM Service) has helped hundreds of people successfully launch their own independent ATM businesses. More info can be found on our website: http://franklinatm.com .

Your question is really about startup financing. Leasing is one option.


Here is a summary of possible options for you. Pros & cons from our experience:

Cash purchase:
 Pro: immediate and complete control of your business
      maximizes cash flow to business owners
 Con: requires a fair amount of initial cash (plan on $2500-$4000 per machine/location)
       may limit the number of initial locations

Leasing (through a finance company):
  Pro: allows quick expansion
       lower up front cost
  Con: Leasse is required to pay interest for the term of the loan
       At the end of lease term, leasee "buys" the ATM for $1 or 10% (depending on loan terms)
       negatively affects cash flow for a long time
       does not lower risk to business owner
       hard to get financing
       requires significant down payment (25%+)
       Most leasees are required to continue paying interest far longer than the normal "payoff" period would be for an ATM

In almost all cases, cash financing is better than leasing. Lease companies make all their money from the interest that the leasee pays. Lease terms are not set up for early payoff. Most ATM leasees would rather pay their loan off quicker....once the business is operating and they realize that they could have paid off the entire machine in 12-15 months based on the profit alone (estimate of a typical ATM).



other options:
  - Angel financing
  - short term credit financing

(more detail in the ATM Business Owner Guidebook)