Need a Loan to Finance Your Laundromat Purchase?

Most people buying a Laundromat do not have all the money to make a full cash purchase. This means you have a business in mind, but don't have the money to complete the purchase. Most lenders are going to require you have approximately 20% to 40% down to qualify for a loan. If you understand this limit (to most borrowers), you can easily determine the price range of the stores you should be looking at in your search.

Of course, if you don’t need the money, the typical rules don’t apply. For purposes of this article, we’ll discuss as if you’re a first-time buyer with no profitable operating history in Laundromats to support your business plan. First time business owners have a higher percentage of failure to owners with an ongoing success record of making money in this business. The lenders will be concerned that you don’t possess the skills to actually own and operate a Laundromat, beyond the self-serving comments in your business plan.

Important to know that most lenders also don’t pre-approve loan amounts prior to you actually finding a Laundromat to purchase, unlike current home loan practices. For Laundromats, it’s best to find a location and they search for loans during the due diligence period. You make your offer to purchase with a clause that allows cancellation without penalty if you’re not able to find a loan. If you have the requisite cash percentage and reasonable credit, loans are almost always available for Laundromat purchases. Don’t worry about this part of a purchase.

Proof of funds might be required by the seller of a good Laundromat to demonstrate you have the cash available for an adequate downpayment. This is not unusual coming from sophisticated sellers. Now let’s explore some of the facts and opinions I have on obtaining a decent loan on a Laundromat.

  1. Try and find an experienced person who has regularly placed loans on Laundromats. The particulars of dealing with commercial loans is a skill not often possessed by home loan specialists. Don’t be the “training subject” for a non-commercial loan salesperson.
  2. If you want to get more information on commercial loan search this website for help or if you want an alternative, you can search out retired from SCORE and other experienced owners.
  3. Most major banks are not actively pursuing loans for Laundromats. We’re normally not big enough for their taste.
  4. Some smaller banks have a history of lending to Laundromats and finding them will ease the process of obtaining a loan. In SoCal, the Korean owned banks regularly lend to Laundromats with great terms.
  5. SBA loans are sometimes unpopular to Laundromat owners because they often tie up all your assets, investments and real property. For example, you can’t sell off a duplex you own without their approval, but the rates and terms can be appealing and worth a consult.
  6. Eastern Funding as a lender has concentrated on Laundromats for years. They should be one to consider in your search.
  7. Many manufacturers, including Alliance, LaundroLux, Dexter and others have lending programs that may or may not have recourse agreements with their local distributors that can allow lower downpayments. Check with your equipment supplier. Of course, manufacturers are more willing to lend if you include the purchase of some of their new equipment in the mix.
  8. Most buyers of existing Laundromats over value the worth of the equipment. A fifteen-year-old store with original equipment is likely to have about ten percent of the sales price reflected in the value of the equipment. Equipment in place and earning money has value, pulled out and on the street, not so much.
  9. Banks use the “red book” to determine that Laundromat loans have a low recovery potential and often look to borrowers for alternative sources of repayment.

Happy to answer any questions you might have including names of other Laundromat lenders.