You have investigated the Self Service Laundry business, it sounds attractive and you are ready to take your first step in buying your own Laundromat. There are a host of things to evaluate but let’s not get the cart ahead of the horse. The first question is how will you purchase this business?
The coin laundry business attracts a multitude of people from all walks of life who long to enjoy a great return on an investment, a lower stress, relatively simple work day and flexibility in that work day. Consequently there is a lot of competition to buy a store that is either doing well or has the potential to do well.
In my experience, many assume they can enter the business with very little money. You may luck out and take over that lease and walk into a store that requires sweat equity and little money but a vast majority of future store owners will buy the store. Those that have money and the ability to buy now are the one’s who will win the battle for the store they want.
Perhaps you have the money; ready, willing and able to invest in the exciting world of laundry. Or, maybe you don’t have the money and simply assume a loan is readily available to purchase your soon to be thriving business.
If you are in the latter category you want to prepare yourself well before you make an offer or your offer will not be seriously considered.
There are a few options, some easier than others.
Consider using the line of credit you have on your home. If you opened a line in the last several years the rate on that money should be quite low; prime, currently at 3.25%, plus 0 or maybe some nominal margin. This is cheap money and likely the lowest you’ll find to purchase a business.
Another source to tap into which many have but is often overlooked is that of an IRA or 401k. You are legally able to use these funds to purchase a business. There are many rules and regulations that go beyond the scope of this article but with the right counsel this option could be attractive. It is not overly costly to set up and you are not paying any interest. You are giving up the opportunity to earn interest on your investment that is currently in your IRA or 401k but you also could out perform your current yield and YOU are in control of your earning destiny!
What if you don’t have cash on hand, a line of credit or a retirement fund? You need to get a loan of course. Are they easy to come by? Most know that lending is a little more difficult now a days but financing is available.
SBA loans will almost certainly be your best bet. You will need a minimum of 25% down, a credit score north of 680, reserves and the seller will have to provide tax returns.
There are other loans beyond SBA which will have their own set of requirements and guidelines. Again, something to look into now.
Prepare yourself; seek an experienced professional that can help you with the business financing process. This is an invaluable service that will turn you into a real buyer! Do this sooner than later. The last thing you want is to find the right store then have your offered refused due to your inability to perform immediately. Few, if any, sellers will accept an offer with a financing contingency.
You may also need to finance the laundry equipment you will need to refurbish and improve the store. The distributor for said equipment can help you here at the right time but qualifying for equipment financing is less stringent than getting a loan to purchase a business and readily available through many banks and even through equipment manufacturers.
As you continue to explore the world of Laundry remember; first things first. If you don’t have cash on hand decide the best way to get it. If it is a loan or tapping into a retirement fund then get the paper work done right away so you can turn yourself into a qualified buyer and begin building your Laundry business!