How to Get Financing for a Laundromat?

Alternative Small Business Funding

As the worst of the pandemic looks to be behind us, aspiring business owners have reason to dream again. Whether you’re reading this with a concept, or you launched your business some time ago, there’s laundromat financing for everyone. With this in mind, don’t be afraid to keep reading whether you want to launch a new laundromat business, need help surviving after a tough pandemic, or want to invest in expansion in 2022.

In this guide, we’re going to cover all the information you need from laundromat startup financing options to alternative financing. Even if you think that your dream is over or that you don’t have the funds to take the next step, you could just find a solution that you hadn’t previously considered. However, it’s not all about finances, so we're also going to compile some advice for those standing over the precipice not knowing whether to launch the business or choose another route.

Benefits of Owning a Laundromat

Firstly, what are the benefits of owning a laundromat? Well, contrary to popular belief, laundromats are still incredibly popular across the United States. Using these services is often convenient, affordable, and simple for Americans. Even as technology evolves in 2022, Americans will continue using laundromats (especially those in apartments without the space for a washing machine!).

Here are some of the other benefits of owning a laundromat:

• You can be your own boss and work your own schedule. As the business grows, you can even hire staff and pull back your own involvement. Suddenly, you’re earning a good livelihood without having to do everything yourself. If you have children, this is a great way to get away from the Monday to Friday, nine-to-five grind that keeps you away from loved ones.

• Generally speaking, it’s easy to scale a laundromat business. Over time, you’ll add more machines, more staff members, and potentially even more locations. If one laundromat is popular, why not reinvest the profits and start a second?

• Compared to other businesses, laundromats are generally easier to manage because you don’t need to stay on top of lots of stock. So long as you have machines and cleaning products, everything else is simple. Customers bring in their clothing, you/they clean it, and then the customer collects it or takes it home. You don’t need to worry about inventory, sending orders across the country, or other strenuous tasks.

• You don’t need to wait for customers to pay because they settle invoices on the spot; this is much better than waiting on several clients to pay just so that you can afford your electricity bills. With coin-operated machines, customers can’t enjoy your service without first paying (you never have to chase anybody up!).

• Furthermore, coin-operated machines also make your life easier because your customers are in control of their own washing. If something goes wrong, you won’t get the blame (assuming the machine is working correctly!).

• In terms of the long game, you could also argue that laundromats are easier to sell compared to other businesses. Although you might not like to think about that now as a laundromat startup, it’s important to keep it in mind.

• Finally, there isn’t too much stress when it comes to the legal aspects of the business either. Many laundromat owners can get started with a quick inspection of the coin machine and a laundry license.

Drawbacks of Owning a Laundromat

Like any business, not everything is perfect. If you’re still in the early stages, consider these potential problems before investing too much time or money:

• Though you can work your own schedule, you might cut off a percentage of your loyal customers by closing at certain times. While some people can only visit early in the morning, others can only wash their clothes in the evening. If you want to work your own schedule, it’s best to hire support as soon as possible so that you’re still open for all customers (whenever they may visit!).

• As the business owner, the burden of responsibility falls on your shoulders. You need to be ready to face all sorts of obstacles and challenges if you want to succeed. What happens when a machine destroys clothing? What if the machines stop working? What if your staff members are all sick?

• Since the machines themselves are relatively expensive, you’ll need capital to get started.

Fortunately, the South Florida Funding Group knows all about laundromat financing, alternative funding, and everything else you’ll need to start or scale your business. Why not get in touch with our informed, passionate team today?

Can You Make Money with a Laundromat Business?

Another question that you’re likely to have concerns the profitability of laundromat businesses. Can you make money in this venture? Well, the short story is that laundromats are generally profitable. According to the Coin Laundry Association, the average revenue of laundromats sits at between $15,000 and $300,000. However, getting to this stage is often the most difficult stage.

Before securing laundromat financing to launch or grow your business, you'll need to keep the following considerations in mind:

Competition - General rules go out of the window when a community already has five laundromats and you’re trying to become the sixth. When considering any business, look at the existing services in the area and whether you could compete or whether you’re entering a saturated market.

Location - You might think that this is the same point, but the location is important for other reasons than just competition. For instance, a laundromat in a wealthy area might not enjoy as much success compared to one with many apartment blocks. Wealthy homes are likely to have their own washing facilities while apartments are too small for machines.

Services - Of course, the profitability of your business will also depend on what services you will offer to the community. Will you only offer laundry? Will you wash, dry, and fold? Do you just provide the machines for customers?

Expenses - We’ve touched on it already, but you also need to consider how you will approach the niche. Will you do everything alone from the start? Or do you plan on hiring additional staff to make your life easier? Similarly, will you buy new machinery or second-hand machines? The higher your initial expenses, the more revenue you need to generate to overcome this problem.

Marketing - Lastly, you shouldn’t forget the marketing aspect of a laundromat startup. You’re not likely to need TV commercials, but you should still look to advertise locally through billboards and other placements. What’s more, word of mouth now takes place online so launch social media profiles, claim your Google My Business profile, encourage positive reviews, and start a website. If you can create a sensible marketing strategy that doesn’t drain the budget, there’s no reason why you can’t make a good profit with a laundromat business.

Naturally, you’ll also need funds for contingency, but even this pressure is less intense compared to other business ventures. For instance, you’ll need funds in case machinery breaks or you need to compensate customers. Other than this, the risk is slim and insurance policies can cover drastic events like a natural disaster.

Starting a Laundromat Business

While this is irrelevant for those who have already started their dream business, we also wanted to provide a quick breakdown of the steps required to become a laundromat startup.

Step 1 - Decide on your laundromat services and business entity. While some launch as sole traders, others enter partnerships or use a different entity.

Step 2 - Pick a business name (you want something catchy without intruding on the names that already exist).

Step 3 - Create your business plan - four short words that will require lots of planning and resources. Your business plan should contain a summary of your business, competitors (threats), services, marketing plans, prices, target market, equipment costs, business objectives, target market analysis, and more.

Step 4 - Register your business and ensure that you have the correct licenses and permits - if you’re unsure of anything at this stage, contact a lawyer for support.

Step 5 - Find your location and consider laundromat equipment - at this stage, you’ll need to weigh up the pros and cons of buying new vs buying old vs leasing/financing (more on this in the next section!).

Step 6 - Secure financing and implement your laundromat business plan.

Laundromat Financing - Your Options

Ah, step six - it looks so simple. Yet, it’s the step that stops many businesses from either launching or expanding. With laundromats requiring a healthy investment, you might think that your dreams are unobtainable. Thankfully, the South Florida Funding Group has changed the circumstances of many in the same position as you are right now. Whether you’re joining a franchise or launching a new brand, here are some of the financing options that you can consider (this list includes alternative funding solutions!).

SBA Loans

Firstly, this is considered one of the best financial routes for small businesses because it’s backed by the Small Business Administration (SBA). Typically, the SBA backs up to 85% of the loan and this makes small business owners more attractive to lenders. If you don’t qualify for a traditional bank loan, you could qualify for an SBA loan. As well as protection, SBA loans also offer high amounts, long repayment periods, and low-interest rates.

The problem with many laundromat businesses, experienced and otherwise, is that they still need a strong credit history to secure the loan. Also, the application is long, and the waiting period is sometimes extensive. If you need quick financing, you’ll want to explore other options on this list.

Term Loans

Essentially, these are similar to SBA loans, but they don’t have quite the same financial requirements. So long as you don’t owe too much money to lenders and can prove profitability in the business, you could secure a term loan. Since the SBA doesn’t guarantee a large portion of the loan, the interest rate will be higher for such an arrangement. Also, you won’t have as long to repay the amount.

Equipment Leasing and Financing

Next, we come across one of the most reliable and valuable alternative financing solutions for laundromats. Since the equipment is such an important part of the business, you might decide to use the South Florida Funding Group to finance this part through leasing or financing.

With leasing, the idea is that you essentially rent the equipment from the vendor. So long as you meet the monthly payments, you’ll keep the equipment. If you fail to meet the monthly payments, the vendor will take the equipment back.

The process with financing has similarities and differences (and this is why it often gets people confused). For example, you will pay a monthly fee and the vendor will take the equipment back if you fail to make the agreed payments. On the other hand, you will own the equipment both during the contract and once all the payments are made. When leasing, you never own the equipment (it’s important to keep this in mind to prevent confusion!).

Whether you want to open a new business or grow an existing one, this is one of the best ways to get the equipment you need without having to find the money to buy it outright.

Business Line of Credit

Finally, the last major alternative funding method we want to discuss comes in the shape of a business line of credit. If you have a credit card, it works in the same way but for business expenses rather than those little monthly treats. If you don’t use the line of credit, you won’t pay anything. When you use the account for certain expenses, you’ll then pay interest on the amount.

Summary

Whether a laundromat startup or a business in the growth phase, you have obstacles and challenges ahead. However, the good news is that lots of laundromat financing options exist (including reliable alternative funding options). Even after our suggestions, you might explore a merchant cash advance or secured business loans (where an asset acts as collateral for a loan).

Either way, be sure to contact the professional team at the South Florida Funding Group for more information about getting alternative financing for a laundromat!