Business Loans for Laundromat Owners: Overcoming the Challenges
Opening or expanding your laundromat business requires capital, probably more than you have saved in the bank. When exploring your business funding solutions, you should consider your needs. Business loans for laundromat owners can be used to cover items like; large washing equipment and drying machines, cleaning solutions, folding tables and seating. Your business will also need appropriate insurance for liability and a reliable staff.
Securing the right loan is crucial to a smooth start or continued growth of your laundromat business endeavor. According to businessfinance.com, your investment could be about $40,000 depending on the size and scope of your business operation.
Part of your challenge will be that your monthly revenue is dependent on your customer base, which can fluctuate over time. Because of this, your type of business may be considered “risky” by conventional lenders and loan approval probably won’t come easily or quickly.
The first step is to find a laundromat business loan you will qualify for as well as one that fits your unique needs. Here are a few of the options you may want to consider:
Since the financial crisis in 2008, banks have become very particular about who they loan money to. Small business owners have mostly been cast aside. According to entrepreneur.com, it simply isn’t profitable for them to provide loans of under $200,000, which is what typical small business borrowers, like laundromat owners, are asking for. Their product is simply not an ideal fit for many reasons:
- Traditional banks typically will decline a loan if your business records demonstrate decreasing sales, low cash flow, or if you lack collateral or a significant amount of managerial experience.
- Small businesses like a laundromat are considered a higher risk than large businesses. In turn, they demand collateral, guarantees and excellent credit to qualify.
- If you qualify, you might get a relatively low interest rate, but because of the risky nature of the business, the bank may require that you pay a balloon payment a few years into the term of the loan. Having a balloon payment may mean you will have to refinance the loan before its paid off and deal with another round of associated closing costs.
- According to Foxbusiness.com, a request for a start-up loan means you lack the required three-year financial history to support the business’ credit-worthiness. Most banks avoid doing business with start-ups.
- The bank application is lengthy and very detailed. You will be expected to have a very well-articulated business plan, proof of how you would ensure all safety regulations are followed, an analysis of your competition and your marketing plans, personal financial data and collateral, just to name a few items on the checklist.
Small Business Association (SBA)
The SBA is a government organization that offers specific programs for loans considered higher risk, like laundromat businesses. They are based on the value of your overall collateral, which could be the equipment required for your business as well as real estate property you own. A 90% loan to value is possible versus 70% or less with traditional bank sources.
The SBA does not issue the loans themselves, but rather connects borrowers to one of their lending partners. Because they qualify you, they in-turn guarantee a portion of the loan. It may sound like your odds are better in securing a loan but consider all the facts:
- A plan to address all safety regulations and insurance requirements may be required within the approval process.
- An SBA loan can take up to 90 days or more to put into place and because they are a government backed program, the entire process is document intensive. Expect your overall credit worthiness to be examined under a microscope.
- Your resume, business plan and even your skills and ability to manage your laundromat business may also be scrutinized in the decision process for the loan.
More and more business owners like yourself are looking for better alternatives in lending solutions. According to, entrepreneur.com, about two-thirds of small business borrowers seek alternatives lenders as opposed to bank financing.
The reason behind this shift is that alternative lenders have flexibility that banks or the SBA don’t have. They offer loan products that align with your business needs not just their own requirements. Interest rates may be slightly higher than a bank, but are outweighed by the benefits, which include:
- Documentation is a fraction of what a bank or the SBA requires.
- Typically, they look at what you are trying to build and your goals and find a loan product that works for you. In other words, you are more than just your credit score.
- Alternative lenders often have the flexibility to offer several loan products, one of which will meet the needs unique to your business.
- They can offer flexibility in the repayment schedule to fit the flow of your cash revenue throughout the year.
- Applications are typically fast, easy, and provide you the money you need quickly.
There are business loans for laundromat owners available. The key is choosing an option that fits your needs and unique circumstances. Finding the right loan means securing one that limits your risks and supports your business potential. For modern business funding solutions, contact Credibly today!