A Quick Guide To Third-party Financing For Your Cryotherapy Business
Cryotherapy is one of the best new businesses. It's not shocking that many entrepreneurs are investing in it. Third-party financing is common across industries and cryo entrepreneurs can benefit from cryo chamber financing deals in 2021.
How will you finance your cryotherapy business?
Setting up the business requires a lot of investment. This is because a single machine costs about USD 75,000, excluding operational costs.
To succeed in the cryotherapy industry, you'll need:
The right business model.
A suitable financing method.
Most people prefer buying the machine in cash (if they have the amount). There are also those who get into contracts with the supplier. This allows them to split the payment into fair amounts.¹
Cryo chamber financing through a third-party is a strong option for investors.
Pros and Cons of Cryo Chamber Financing Using Third-Parties
Financing through a third-party involves entering into an agreement with a lender. They cannot be the supplier and help you to get funds to lease or buy the cryotherapy machine.
Below are the advantages and disadvantages of using this method.
Advantages of Third-Party Financing
It Increases Your Options
Not every cryo-chamber supplier gives financing options. Those that do only allow it if you’re buying their products. The deals sometimes also come with conditions. Most of them focus on the maintenance of the machine.
Third-party financing provides you with a range of buying options. This is especially so when you're not associated with the supplier. You can research and buy the equipment that best suits your business model, and repair and maintain it as you please.
More Attractive Lending Terms
It is quite common for vendors to offer strict lending terms to their clients. These niche suppliers are often an entrepreneur’s first choice. The end result is high interest rates.
Suppliers also don’t offer loans as their primary service. They are less likely to provide you the loan at good rates.
Banks and financial institutions, on the other hand, usually give very attractive terms. This is to encourage businesses to borrow from them.
For example, it is not uncommon for these companies to give a 125% loan on the equipment price to help in installation and training costs.²
Ownership and Control of the Property
The ownership of the cryotherapy equipment shifts to you when you complete payments. This means the owner can repossess the cryotherapy machine when you delay payments.
The seller also has significant control over how you use the equipment. This changes once the ownership is transferred.
Disadvantages of Third-Party Financing
Poor Convenience
Third-party financing involves three parties; the lender, the seller, and the buyer. You will have to sign two contracts;
One with the vendor
Another with the financial institution.
It is more helpful to borrow from the vendor as you only have to deal with them.
Lower Deposits Required
Owner financing usually requires a lower amount of upfront fees than third-party agreements. This has a less immediate result on a company’s cash flow.
Should You Consider Third-Parties For Cryo Chamber Financing?
The choice between vendor and third-party financing is often difficult for start-ups and small businesses. You should consider your business model, the effect on cash flow, and the cost of both methods before choosing to use one.
Founded on facts: for peer-reviewed articles, scholarly journals, and articles cited above please see the below sources.
Entrepreneurship Financing: Broadening the Range of Instruments - https://www.oecd.org/cfe/smes/New-Approaches-SME-full-report.pdf
Pros and cons of vendor financing for equipment purchases - https://www.bdc.ca/en/articles-tools/money-finance/get-financing/pros-cons-vendor-financing-equipment-purchase