Five Ways to Get Financial Help Running An Escape Rooms Business

Financing a business is always a daunting task. Unless you’re sitting on a large pool of money – which face it, most of us just do not have that kind of disposable income lying around – you will need help getting the necessary funds together to invest in your business and cover costs. We have compiled five options that you may want to explore to help fund your escape room business. These are some of the ways that our business partners have been able to get enough funds to get their Breakout franchise off the ground. 

1. Small business loan.

Many people look to various lenders to get the startup capital needed to fund a new enterprise. These loans are fairly straightforward – a lender lends your money which you then pay back at an interest over time. There are various lenders to choose from such as banks, credit unions, online P2P lenders and which route you choose will depend on the pros and cons of each or on the terms of repayment and interest charged that you’re most comfortable with. 

If you’re looking to get a loan from a credit union or a bank, they will typically require a business plan to assess the viability of your idea and your potential ability to repay the loan. This will be part of a loan application which you have to fill out and lenders will require you to furnish them with detailed information about your business idea. Needless to say, you should only seek to get a loan from the bank once you’ve done the proper research. Banks typically require more detail because they are able to dish out huge sums compared to other smaller lenders, and therefore need to be convinced of the soundness of your business idea. 

The biggest positive of being financed through banks or credit unions is larger lenders have deep pockets and if you can convince them of your idea, they can be the only funding source you need to cover all your costs. They also offer predictable payment terms which will be agreed upon right from the start and compared to smaller lenders, have lower interest rates.

On the downside, there will be a lot of paperwork and you may have to put up a personal guarantee such as any assets you might have. Should you fail to repay the loan, the lender can legally seize your assets. 

If you have trouble qualifying for a loan from a bank, there are other options available. You can try online P2P lenders or diversify your capital source by combining a small loan with funds from other sources as detailed further in this article. 

2. Friends and Family

While this might not be the best option for everybody, it is not uncommon, particularly in certain cultural contexts, to borrow from friends and family to start a business. If you have a strong support and social network, this could work out well for you. However, this route is the ‘grayest’ of routes as there are no set rules as to how this should be planned, and it will be up to you and your family or friends to decide the levels of involvement or the repayment terms. 

However, unless you’re dealing with an unusually generous parent, in which case – they might actually fall more into the angel investor category – you may want to make these loans as official as possible. You will probably need to get legal advice to draw up clear terms of the loan and possibly find a third party to facilitate loan repayments to make the process more official and accountable. This will probably keep the peace between everyone and will go a long way in avoiding sticky situations that could sour close knit relationships. 

The pros of getting loans from families and friends is that you can usually negotiate better terms and rates than traditional loans, as friends and family are likely to want to help you out. As well, there will be less risk if you can’t pay back the loan. It is unlikely that friends or family will demand your assets should your business encounter problems. The cons of course is that you are potentially putting your relationships at risk, and mixing business and personal areas of your life might not be the best thing to do.  

3. Find a Partner

There are many benefits to finding a partner and going into business together. For one, you can split the responsibilities and bring to the table different skill sets that complement each other. Also, if you have a group of partners, you can pool your resources together and potentially come up with enough funds to start your business without having to take out loans. 

Approach friends who might have an interest in investing in new a business, or network and meet people with similar interests. One important thing to remember is to be clear about the role of each person. Perhaps you have a partner who is more interested in funding your escape room as a potential investor and whose involvement in the actual running of the business will be minimal. Or you could find someone who is eager to split the work 50/50 with you. In any case, be very clear about where everyone’s roles and responsibilities lie to prevent friction down the line.  

There is no right way to go about this but finding business partners can be a relatively risk free approach to financing as everyone has similar stakes in the business success. As well, you may find people who can bring a different skill set to your business, which would be beneficial in getting things done efficiently. 

4. Work with the landlord

Another option is to partner up with the landlord of your escape room to help with offsetting certain costs of your business. You could approach the landlord and ask if they are willing to cover the costs of renovating the space to host your escape room, and as a trade-off, you agree to sign on to a much longer lease term and pay back the landlord’s contributions in the long run. 

This model can be viable if the landlord is excited about the business idea. The landlord would be a quasi-business partner and one obvious pro to this is that you will be guaranteed a longer lease term for the property as the landlord now has a vested interest in the business succeeding. 

As well, you can perhaps count on your landlord in making sure that everything that needs attending to at the property will be sorted out promptly and efficiently. This peace of mind is invaluable to all business owners and having a responsive and responsible landlord as your business partner could offer many perks

5. Angel Investor

Finally – and this is arguably what most people would be over the moon to have when starting any business – you could look for an angel investor. If you are good with networking and know people or know people who know people who have money to invest, this could be a very promising source of financing for your escape room. 

Of course, you will need a bit of a thick skin to pitch your idea and ask for money in return, and you will have to be able to deal with rejection, but people with money to invest in individual entrepreneurs do exist and this option should not be discounted at the outset. 

Angel investors may make a one-time investment or provide funds in installments over the lifetime of the business. In return, angels will typically require equity for the business. Some caution would be advised here. Choose your investors wisely as you are giving away some if not most of the ownership of the business to this person.

The big plus of having an angel investor is that these arrangements tend to be quite informal and flexible. As long as you maintain a good relationship, the lender will have a vested interest in your success and their deep pockets can well be an asset should there be difficulties along the way. However, such people are really difficult to find, hence the title, but if you do find someone like this, you should not pass up the opportunity. 

Starting an escape room franchise is not unlike any other business and these are some ways you can go about getting enough money to open an escape room. Having sufficient funds is a necessary requirement in ensuring that your business will have a chance at success. If you’re diligent with looking into every option, it is unlikely that you will come up short with funding options. All businesses carry a risk but the rewards can also be great if you do your due diligence. Our franchise model has been successfully implemented in different countries and continents, so if you’re looking to start an escape room business, do look at our Breakout franchise. Press the link here for more information. It may just well be the business you were looking for.