CHICAGO — Establishing a coin laundry business can be a daunting process.
From site selection to equipment consideration, a lot of thought and preparation goes into the overall life of a Laundromat.
The foundation under all of these decisions stems from how much capital an operator has to help grow his/her coin laundry business.
Whether an existing operator, or a new investor, applying for credit to fund coin laundry projects can also be an intimidating process.
What financing options do operators have in today’s market and, once a lender has been chosen, what key documents do they generally require from a borrower?
American Coin-Op reached out to experts in the financing industry to answer questions like these to ensure that coin laundry operators understand the ABCs of funding.
STATE OF THE LENDING INDUSTRY
The current lending market is “very appealing” from a borrower’s perspective, according to Jim Freeze, president, Dexter Financial Services Inc.
“Interest rates remain quite low by historical measures, and availability of credit has improved,” says Freeze.
Carol Dang, vice president of sales and marketing at Valley Village, Calif.-based Elite Business Investments, agrees. She’s seeing “more competitive rates” among lenders.
“We are experiencing a lot of growth in financing requests and originations,” says Matthew Westphal, financial services manager for Alliance Laundry Systems.
“We believe this is driven by a combination of low interest rates, lower cost of rent and real estate, and a demographic shift to higher renters. All of these conditions favor a robust and aggressive economic climate for the self-service laundry business.”
Relatively newer businesses can find more success in obtaining financing from their local community banks as opposed to “large, regional or national money center banks,” says Robert “Bob” Rinaldi, vice president, Milnor Capital.
“The more standard the financial story, or adherence to perceived norms in financial ratios, the more lenders will devote attention,” says Rinaldi.
“However, the vast majority of small businesses don’t have the luxury of everything in their business growth fitting into a traditional model. If there is a story or something that requires explaining to completely understand the company, then that is where the community banks tend to shine.”
AVAILABLE RESOURCES
“For current owners, there are several banks that will provide refinancing, especially if there is some re-tooling along with it,” says Dang.
Operators looking to re-tool their store can turn to banks that specialize in the laundry industry, as well as equipment manufacturers, she adds.
To meet the needs of a laundry investor, a “complete laundry lender” should have access to finance programs like new-equipment financing, acquisition financing and equity financing, according to Westphal.
“For prospective buyers, there is bank financing, as well as seller financing, available on acquisitions of laundries,” adds Dang. “If the laundry that they are purchasing is in need of new equipment, the banks look favorably on doing a combination loan for the acquisition along with the re-tool.”
In addition to these options, Rinaldi points to the U.S. Small Business Administration as another financial resource.
“Lastly, if your business is located in a specific ‘opportunity zone’ (inner city),” Rinaldi adds, “you may find some of the local community banks more receptive than others due to regulatory oversight that promotes lending to businesses in these areas.”
SCOUTING A LENDER
While competitive terms and rates are important aspects to examine when scouting a lender, many of the experts also agree that investment on the part of the lender is key.
“Small-business owners should look for a lender who is going to be in it for the long haul with them,” says Dang. “If a small-business owner can develop a personal relationship with the banker, it will go a long way for him or her in the future. I see that my clients who have developed these relationships find it much easier to get financing or lines of credit in the future.”
“A small-business owner should look for a complete lender that will be willing to offer all the financial tools and distributor resources needed for the laundry business,” says Westphal.
“Also, look for a lender that is willing to tailor a finance solution to an investor’s specific needs [as well as a] lender that offers financing programs that go beyond just standard new-equipment financing, such as equity and acquisition financing.”
Freeze advises operators to also partner with lenders that have a “strong understanding” of the laundry industry, in addition to a “reputation of operating with integrity, ability to handle future business credit needs, and competitive financing program offerings.”
Check back Thursday for Part 2!
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].