Financing a laundromat in uncertain times (Conclusion)

CHICAGO — For small business investors, especially those trying to get into the laundry industry for the first time, securing financing for a laundromat can be difficult under normal circumstances. When events like a public health crisis create economic doubts, the process takes on added weight.

This month, American coin interviewed a handful of manufacturers and commercial lenders about the state of loans today, how the laundry industry has responded to the waning pandemic, and the best approach to get approval for loan financing your laundromat.

Part 1 discussed the resources available when applying for funding and the documents to gather or prepare to best support their application. Part 2 discussed the industry’s response to the coronavirus pandemic and the general lending criteria a borrower must meet to get approved for a loan. Part 3 looked at the influence of project scope and listed some “red flags” that could bury an application from the start.

Let’s conclude:

Q: An operator is approved for financing. What should their next step be?

Jeff Harvey, Head of Underwriting, Alliance Laundry Systems: We strongly encourage investors to pre-qualify for funding at the very beginning of their project. This is usually a quick assessment of what an investor would qualify for subject to finalizing their project. It’s like buying a house.

Most homeowners get pre-qualified from their lender and then proceed to find their home. Once you are pre-qualified with a lender, you work with your local distributor to finalize your project and get your loan approved. After your approval, your next steps in the loan process will be to sign and provide your lender with the required loan documents so that they are ready to issue the loan proceeds… when you need to pay for the project.

Matt Kluesner, Director of Portfolio Management, Dexter Financial Services: They will need to work with the various other parts of their laundry project to complete it. Funding is only one piece of the puzzle.

There may be new construction or renovations to complete, which usually includes obtaining the proper permits and working with a licensed contractor. The operator will also need to work with their equipment supplier to order the equipment needed for their laundry project, then coordinate its delivery and installation, as well as work out the details with their landlord or mortgagee and obtain insurance coverage. appropriate insurance. These are all miscellaneous elements that could be involved in a laundry project.

Marc Stern, Executive Vice President and Chief Loan Officer, Eastern Funding: If you’re buying a laundry, do your due diligence: review the lease of the space (and) utility bills, count the coins, and spend time in the laundry with the seller.

If retooling, order the equipment as soon as possible and hire the contractor as well, if you haven’t already.

Gary Corley, Sales Manager, Southwest Region, Whirlpool Commercial Laundry: If an operator has not already done so, contacting a distributor is the next step. Distributors have a good understanding of the market and can provide the information and tools needed to succeed. A distributor is also a great resource for things you’ll need to run your store, like parts, repair services, etc. Industry trade magazines can also help an operator locate other suppliers they will need, including soap suppliers, insurance companies. , etc.

Q: When an operator or investor is denied a loan, what are their other options?

kluesner: One option is to find another partner who has the appropriate qualifications to help meet the approval guidelines. If there is a certain area of ​​the lending criteria in which the trader or investor is deficient and which is causing the loan to be declined, they may seek to mitigate that deficiency by providing strong performance in another area. For example, if they are inexperienced and have a bad credit history, an operator or investor could mitigate this by providing enough capital to the project, which will also reduce the loan amount required and improve the coverage of the debt servicing.

Back: If they are rejected by a finance company, there is a good chance that they will be rejected by others. The only option is to pay cash if this happens the seller will finance the transaction or look for another type of business.

Corley: If an operator is denied funding based on activity, do not give up. They should look for a better location and keep trying. The applicant also has the right to know why they were turned down for an equipment or acquisition loan. Assuming the applicant was creditworthy, it may be possible to reduce the size of the initial retooling project or increase its cash investment in the project to help mitigate lender exposure.

Harvey: If an investor is turned down for financing, they will receive an explanation as to why, and I encourage them to speak with the lender to understand why and what they can do to qualify in the future. An investor can then potentially work to improve these factors.

Another option is to apply with another lending institution, as institutions may have different underwriting requirements.

Q: In addition to the information you’ve already shared, what advice do you have for current or potential store owners looking to fund a laundromat project?

Back: When submitting your application, please submit everything the funding company has requested and submit it in an organized and complete form. If this is done, the finance company’s job is easier, you’ll get a response faster, and most likely, you’ll be approved if you meet their lending criteria.

Corley: Contact the hardware distributor in your area. They know the market and can help you with everything from finding a good location, demographic studies, store layout and design, and contractors. More importantly, they know the best finance companies for the laundry industry.

Harvey: When it comes to financing, I strongly encourage investors to speak with a lender who has experience in the industry. Having (such) a lender…gives you an additional resource when investing in the laundromat industry. Manufacturer-based finance companies can be a great resource, as they are usually created to provide an easy-to-use finance solution that helps investors get their product.

We encourage investors to look beyond their current project when working with a lender. You want to find a long-term partner who supports your current and future needs to streamline your financing needs.

kluesner: For future owners, be sure to do your research. Knowing exactly what your laundry project will entail is more than half the battle. Then you can decide how to proceed and what will be needed to best achieve your goals. There are several experienced and successful laundry owners who would be more than happy to share tips and pointers with new owners getting into the business.

For current owners, I would say be proactive. Staying on top of your equipment maintenance and knowing when a machine is about to need replacing is how you can operate without a significant loss of revenue. This is especially important since the pandemic and related supply chain issues have developed. The time to get new equipment has been extended over the last two years and owners need to be proactive in order to avoid downtime when a machine is not generating revenue.

Missed an earlier part of this article? You can read it here: Part 1 — Part 2 — Part 3

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