Financing a Laundromat

Whether you are buying your first coin laundry business or refinancing an existing laundromat, there are many sources to finance your business.

Most business owners have a loan on their business or their equipment since this increases cash flow at start-up. The average loan interest rate is under 8% while the average return of a laundry business is over 20%.

Laundromat Financing Options

Laundromat owners shouldn't limit themselves to traditional bank financing. In addition, consider alternative financing options like:

Seller Financing — it is common for the seller to carry a note. Try to negotiate attractive terms with the seller when you buy the business.
Home Equity Line Of Credit — Use the equity in your home to finance this high cash flow business.
SBA Loans — Small Business Administration loans.
Private Investors — often friends and family will lend money to finance your business because they can receive a higher interest rate vs. bank CDs. It is also possible to find "equity partners" to invest in your business in return for a percentage of the business cash flow / profit.
Hard Money Loans — there are private lenders who lend based heavily on the collateral (the business) and not so much on the borrower's personal credit history.

A local business broker should be able to give you referrals to banks and private lenders in your area that may provide financing for your laundromat purchase.

Typical Laundromat Financing Terms

Loan interest rates are typically higher from non-traditional lenders vs. a normal bank loan, especially if this is the first time you buy a laundromat. However, it gets easier to find attractive business financing options as you gain experience and prove your skills in operating a successful coin laundry business.

Note: Financing expansion of an existing (successful) laundromat location or replacement of old equipment is easier than getting a loan for an initial purchase.

The typical terms you should expect are:
LTV (loan to value ratio) of 60% to 70%
5 to 7 years
Full amortization
Interest rate of prime plus 2% to 5%.

Most laundry equipment vendors have financing available with the purchase of their equipment. Contact your local equipment vendors and ask what financing programs they have available. One strategy is to purchase a laundromat with outdated equipment (at a good discount) and have the equipment vendor finance your purchase of all new equipment.

An alternative to an outright purchase of new machines is leasing your laundry equipment.

Your two biggest expenses will be rent and your loan payments. So, it makes sense to shop around to find the best terms for your loan as it will be fixed for a number of years and cost you thousands of dollars.

Financing a Laundromat