If you’re thinking about opening a haunted attraction, you likely already have an idea of what kind of haunt you want to build. Maybe you already have a venue picked out, too.
But as your planning gets more serious, one truth will threaten to derail all your big dreams: funding a haunted attraction is expensive. There are numerous startup costs, from props and decorations to signage and lighting. Then there’s the business side: how will you cover payroll, the electric bill, filing costs for permits, insurance, and other necessities?
You might have some personal savings stashed away, but most haunts need some extra funding to get up and running. But that DOESN’T have to be scary. It’s important to know your options and find the right kind of startup funding for your business. Read on for six ways to fund your haunted attraction.
Business loans can help finance the startup costs for a new haunt or pay for upgrades and growth of an existing business. There are several types of business loans available, but the two we’ll focus on here are secured and unsecured.
A secured loan requires collateral: an asset or property that the borrower offers to secure the repayment of the loan. (That means, if you fail to repay the loan, that asset can be seized by the lender.) Unsecured loans, on the other hand, are approved based on the borrower’s creditworthiness.
Regardless of which type of loan you borrow, you’ll typically receive the funds as a lump sum then make fixed monthly payments over the course of two or more years to repay the loan. To be approved, you’ll need to present a written business plan, including how much revenue you expect to take in over the first three years that your haunt is open.
Finding the right financial institution for your loan is key. Larger commercial banks tend to make decisions based solely on credit history or another set of fixed criteria. Small community banks or credit unions are more likely to work with you based on your overall business profile and character. They often have better rates than commercial banks, too. If you have a longstanding relationship with an institution where you do your personal banking, that can be a good place to start, too. If you’re unsure, a good place to start is your local chamber of commerce; they will likely have resources and recommendations for financial institutions that support small businesses in your area.
The takeaway: Look for community financial institutions in your area to get the best rates and be prepared to show a three-year business plan.
SBA Loans are backed by the U.S. Small Business Administration (SBA) but administered through traditional financial institutions like a bank or credit union.
Because they are supported by the federal government, SBA loans are often easier to qualify for, and come with longer terms and lower down payments. The agency doesn’t lend the money directly to you, but sets the guidelines for loans that are made by its lending partners. SBA guarantees that these loans will be repaid, which eliminates some of the risk to the lenders.
The funds can be used for startup costs or to grow your business, depending on your needs. There can also be special rates for veterans, so be sure to ask about those benefits if you qualify.
SBA loans sometimes require a personal guarantee. With more business loans, the lender cannot go after your personal assets if you default on the loan. But a personal guarantee means that you personally will be responsible for repayment of the loan, and your property or assets may be seized if you cannot repay.
The takeaway: If your haunt doesn’t qualify for a traditional loan, you may be able to secure funding through an SBA loan. But be prepared for a personal guarantee on the funds borrowed.
Lines of Credit
While a loan is typically delivered in one lump sum, a line of credit is a revolving fund you can draw from as needed to support ongoing operational expenses. They often renew annually and are secured either by your assets or a certificate of deposit.
What’s the benefit to not receiving your money in a lump sum? You only pay interest on the funds you actually draw from your line of credit. And you’re not required to borrow the total amount you are approved for.
Let’s say you have a big construction project to upgrade one of your haunt’s rooms. You’ve estimated your costs and how much time it will take to complete the project, and have been approved for a line of credit for the total amount. But then, you encounter a delay during the first month of work and have to wait for parts to arrive from a vendor. No worries. You don’t have to draw funds from your line of credit (or pay interest on those funds) while you wait. And if your project comes in under budget, you’re not overpaying for interest on funds you didn’t end up needing.
The takeaway: Lines of credit work best for haunts that have been operating for at least two years and which own assets such as the property where your haunt is located.
A loan from a bank isn’t your only option when funding your haunted attraction. Private investors can provide financing for startup costs or to grow your haunt’s business.
These may be individual investors (sometimes called “Angel Investors”) or investment firms where funds are pooled and disbursed by a group of individuals. In the U.S., individual investors must be Accredited Investors: they must earn at least $200,000 annually or have a net worth exceeding $1 million, not including their primary residence. Essentially, they must have enough of a financial cushion to absorb a loss – because private investment is risky.
Investors provide funds to a business in exchange for either debt or equity. Debt requires repayment, but with equity capital you are giving the investor ownership of a portion of your business (“shares”) in exchange for funds.
One of the benefits of working with investors rather than a financial institution is that they do not typically have the same underwriting or credit process: investors may be willing to take a risk on a business (or entrepreneur) they believe will succeed. On the other hand, you’d be giving up some ownership in your haunt and will have more partners who are entitled to input on the business decisions you make.
Where do you find investors?
- Start networking. Have lunch with a few of your peers in the industry and ask about their investors; maybe they’d be willing to make an introduction. Start sharing your story on social media and actively look for potential connections on platforms like LinkedIn. Investors aren’t going to find you; it’s up to you to find the right investors and capture their attention.
- Attend a conference dedicated to startups or entrepreneurship, such as Money2020, SXSW, or TechCrunch Disrupt. Before you go, you should have your pitch ready: come prepared with a 30-second description of your business, how much investment you’re looking for and when investors can expect to be paid back.
- Apply to an accelerator. Startup accelerators offer coaching and help fine-tuning your business plan before putting you in front of investors. Programs may be full-time or part-time and can last from a few weeks to a few months. It’s an excellent way to make sure your pitch is as polished as possible. In addition, accelerators have existing relationships with investors, so they can make connections that you might not otherwise have access to. Note that most accelerators are looking for scalable startups rather than brick-and-mortar businesses, so it will be key to find the right accelerator if you decide to go that route. Here’s a list of the best startup accelerators in the U.S. to help you get started.
The takeaway: Investors will own a portion of your business and have a say in how your haunt is run. Look for investors who have experience in the haunt industry.
Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people. Unlike with investment capital, individuals participating in crowdfunding do not need to be Accredited Investors, so you can accept donations or investment from friends, family, and even your customers.
There are dozens of reliable crowdfunding platforms out there, such as Kickstarter, StartEngine, Indiegogo, and GoFundMe. These sites can help make sure your crowdfunding campaign is compliant with federal and state regulations, but they charge a fee or take a portion of the funds raised.
The tricky part of crowdfunding is finding people to support your campaign. If your haunt already has a large following of enthusiastic fans, you may have more success than a new haunt that hasn’t built up its reputation yet. Many crowdfunding platforms claim to help you find investors, but in reality it’s very difficult to capitalize on their audiences without additional marketing or advertising efforts.
The Takeaway: Crowdfunding platforms allow you to raise funds from your fans and supporters, but it’s up to you to find the individuals to donate to your campaign.
HauntPay Capital offers haunted attractions the opportunity to receive an up-front infusion of cash (from $1K to $100K) when you use HauntPay as your exclusive ticketing provider. HauntPay Capital is NOT a loan. There are no credit checks and no payback.
We work with thousands of haunted attractions and events and we understand the challenges that come with operating a haunt. Whether you need funds to increase your marketing efforts, hire more staff, or buy new props, we can help. Haunts are approved for capital based on past ticket sales, so this program works best for haunts that have been around for a year or more. The application process is simple and takes just a few minutes.
The Takeaway: You do NOT have to be an existing HauntPay client to receive HauntPay Capital, and you do not need to repay the funds. To apply for HauntPay Capital, click here.
How Will Your Haunt Make Money?
One of the first things lenders and investors will want to know is how your haunt plans to make revenue. For the vast majority, the answer is ticket sales. HauntPay makes it simple to get setup and selling tickets in minutes, and there is ZERO cost to your haunt. No setup fees, no monthly costs. All the fees can be passed onto the ticket purchaser.
To get started, schedule a demo or set up an onboarding call and we’ll set everything up for you!