commercial laundry equipment financing

Commercial Laundry Equipment Financing Breakthrough: Unique Financial Solutions

Last Updated on February 28, 2024 by Gerry Stewart

Opening a laundromat or expanding your existing laundry business requires significant upfront investment in washers, dryers, and other essential equipment.

With costs ranging from $100,000 to over $1 million for a full-scale industrial laundry facility, many entrepreneurs struggle to finance these equipment purchases on their own.

That’s where commercial laundry equipment financing comes in. By spreading your equipment costs over time, financing enables you to acquire the machinery you need to efficiently serve customers without breaking the bank from day one.

We’ll explore the ins and outs of financing options for commercial laundry equipment.

You’ll discover how financing can empower your business growth, learn how to choose the best financing solution and gain practical tips to make the financing process as smooth as possible.

Equipment Needs Assessment – Matching Capacity to Demand

laundry systems
laundry systems

The first step before exploring financing is determining your precise equipment requirements.

While buying more machines than necessary may be tempting, overestimating capacity can burden you with unneeded debt.

Carefully assess essential factors to invest in equipment that aligns with your business’s projected laundry volume.

Sizing Up Your Location

Consider the physical size of your laundromat or laundry facility.

How much floor space do you have available?

Can the facility comfortably accommodate larger industrial machines or smaller space-saving models?

Measure thoroughly and create equipment layouts before committing to financing.

Evaluating Customer Demand

Analyze the demographics and projected customer base in your location.

Residential neighborhood laundromats will have different needs than industrial laundry processing hotel linens.

Create realistic demand forecasts for sizing capacity.

Financing excess equipment adds unnecessary costs if machines sit idle.

Planning for Growth

While starting small initially may be prudent, choose equipment that allows incremental expansion over time.

Opt for modular, stackable machines that allow adding capacity.

Leave room for additional equipment as your clientele grows, rather than overinvesting upfront.

By objectively evaluating these factors, you can determine the ideal equipment configuration to finance for optimizing capacity and controlling costs.

Comparing New vs Used Commercial Laundry Equipment

dry cleaning
dry cleaning

Once you’ve decided on capacity requirements, another key consideration is whether to invest in brand new or used laundry equipment. Both options have their own pros and cons too.

Benefits of New Commercial Laundry Equipment:

  • Higher efficiency and lower operating costs
  • Advanced features and technology
  • Full manufacturer warranty coverage
  • Lower lifetime maintenance expenses
  • Greater reliability and less downtime
  • Higher residual value if upgrading later

Benefits of Used Commercial Laundry Equipment:

  • Substantially lower upfront purchase price
  • Ability to pay in cash rather than finance
  • Established reputation of older models
  • Readily available for immediate purchase
  • Suitable for starting out before upgrading later

When determining the better investment for your needs, consider lifetime costs versus upfront costs.

While used equipment may seem cheaper at first, it may cost you more in the long run through higher energy bills, more frequent repairs, and lost revenue from extended downtimes.

Financing Options for Commercial Laundry Equipment

commercial laundry facility
commercial laundry facility

Once you’ve determined your equipment purchase budget, it’s time to explore financing solutions to fund the purchases.

Traditional Business Loans

One option is a traditional term loan from a bank or credit union.

This provides a lump sum upfront to purchase equipment at a fixed interest rate and a set repayment period.

Banks will require strong business credit and financials to qualify.

For newer businesses, SBA-backed loans provide more flexibility. However, credit decisions may take weeks and you’ll likely need collateral.

Equipment Financing Companies

Specialty laundry equipment financing companies like ROK Financial offer faster qualification and more tailored loans.

They understand the nuances of laundry cash flow and offer flexible terms catered to your needs.

Benefits include pre-approvals in 24-48 hours, financing 100% of equipment costs, simpler documentation, and the ability to structure payments around projected earnings.

Their industry expertise makes the financing process smooth.

Equipment Vendor Financing

Many laundry equipment vendors offer financing programs to purchase their products.

This can be convenient when buying multiple machines from the same manufacturer.

Drawbacks may include limitations on combining financing from different vendors or less flexibility in loan terms.

Do your due diligence to ensure their financing offers are competitive.

Leasing Commercial Laundry Equipment

Leasing through an equipment finance company allows you to pay a fixed monthly fee to use machinery without purchasing it outright.

At the end of your lease term, you either return the equipment or pay a reduced purchase price to buy it.

Leasing provides more flexibility to upgrade later on but comes with fewer tax advantages than purchasing equipment.

Make sure to negotiate fair monthly payments and consider your long-term equipment usage plans.

SBA Loans – Financing Assistance for New Laundry Businesses

commercial laundries
commercial laundries

An excellent option to consider for those starting a new laundromat or laundry business are SBA loans.

The U.S. Small Business Administration guarantees portions of loans made by approved commercial lenders for qualifying businesses.

Benefits of SBA-backed financing include:

  • Requires less time in business and lower down payments
  • Offers loans up to $5 million with attractive low fixed rates
  • Allows longer repayment terms of up to 25 years
  • Provides free business counseling to borrowers

Preparation of financial records and a solid business plan are key to approval.

Refinancing – When to Rethink Existing Equipment Loans

If you already have outstanding debt on laundry equipment, periodic refinancing evaluation ensures you aren’t overpaying.

This allows restructuring existing loans to improve cash flow.

Smart times to consider refinancing include:

  • Interest rates drop – Lower rates through another lender may save substantially over time.
  • Improved credit – A better credit score opens up better loan terms.
  • Cash flow stabilization – Can adjust payments to match business financials.
  • Debt consolidation – Combine multiple loans into a single lower payment.

Work with an advisor to run the numbers and determine if refinancing makes fiscal sense for your situation.

The savings could be significant long-term.

Tax Benefits and Depreciation – Factors that Impact Financing Selection

small business financing
small business financing

A compelling reason to finance rather than lease laundry equipment is the tax advantages of ownership.

Equipment purchases over $2,500 may qualify for a special IRS Section 179 tax deduction.

For 2022 , businesses can deduct up to $1,080,000 in equipment purchases, reducing taxable income by that amount.

Bonus depreciation also enables deducting a large percentage of equipment costs in the first year.

These savings are hard to ignore. Your tax advisor can quantify precise benefits with owned equipment versus leasing.

This should factor into your optimal equipment financing decision.

Evaluating Your Financing Offers – Asking the Right Questions

Once you’ve explored financing options that fit your laundry equipment needs, it’s time to compare offers.

Asking good questions ensures you select the best solution:

Rate and Fees – What is the APR after factoring all interest and fees? Avoid offers highlighting only the best-case rate.

Payments – How much is the monthly payment factoring in taxes and insurance? Are adjustable payments available?

Term Length – How long is the loan or lease? Make sure it aligns with your budget management preferences.

Down Payment – What, if any, down payment is required upfront? Can it be rolled into the financed amount?

Warranties – Does financing coverage extend warranties? Who handles repairs if equipment fails?

Buyout Terms – For leases, what is the buyout cost at the end of the term if you want to own equipment?

Getting financing terms clearly in writing prevents surprise costs.

Compare multiple offers to select the optimal financing mix for your commercial laundry equipment purchases.

Partnering With a Financing Expert – The Inside Advantage

The intricacies of equipment financing can be overwhelming for new entrepreneurs.

Having an experienced advisor guide you through the process is invaluable.

They can ensure you get tailored financing that meets your exact business goals.

Rather than go at it alone, partner with a specialist like ROK Financial to:

  • Save you time explaining your needs and goals rather than filling out multiple forms.
  • Match you with the right financing solutions based on their knowledge of lenders and programs.
  • Negotiate better rates and terms than you could on your own.
  • Handle the process efficiently freeing you up to focus on your laundry business.

I help entrepreneurs find the best financing options for their ventures. One of my most memorable clients was a young couple who wanted to start their own laundromat business. They had a great location, a solid business plan, and a passion for providing quality service. However, they lacked the funds to purchase the necessary equipment, such as tumble dryers, washers, and coin-operated machines.

They contacted me for advice on how to finance their laundry equipment. I explained to them the benefits of commercial laundry equipment financing, which is a type of loan that allows borrowers to purchase or lease new or used laundry equipment. This way, they could avoid paying the full cost upfront and preserve their cash flow for other expenses. I also showed them how to use Quickbooks for payroll and inventory management, as well as how to calculate their cost of capital and return on investment.

They were impressed by my knowledge and expertise, and decided to apply for a commercial laundry equipment financing loan through me. I helped them find the best lender, negotiate the terms, and complete the paperwork.

Within a few weeks, they received the funds and were able to purchase the equipment they needed. They were very grateful for my assistance and invited me to the grand opening of their laundromat. I was happy to see them succeed in their business venture and proud to be a part of their journey.

If you are interested in learning more about commercial laundry equipment financing or other types of business loans, please contact me at (888) 653-0124. I would love to help you find the best financing solution for your needs.

Beyond Financing – Planning for Ongoing Equipment Efficiency

While financing covers the upfront costs of acquiring laundry equipment, you must also budget for ongoing costs to maximize efficiency and minimize disruptions.

Prioritize Preventative Maintenance

Build preventative maintenance into your equipment financing decisions.

Well-maintained machines have longer lifetimes and fewer costly breakdowns.

Many financing deals can bundle in multi-year service contracts or extended warranties.

Proactively replacing worn parts like belts can avert expensive rush service calls.

Upgrade to Energy Efficient Models

Newer energy-saving laundry equipment can cut electric, gas, and water bills substantially compared to older technology.

Efficiency improvements of 40% or more are possible.

While energy-efficient models may cost more upfront, the lifetime cost savings often justify the investment.

Financing spreads out the initial purchase cost while rapidly paying back through reduced utility expenses.

Monitor Technology Innovation

Rapidly advancing laundry technology brings innovations like remote monitoring, automation, and data-driven diagnostics.

While not essential from day one, building future capabilities into financing decisions ensures your equipment stays cutting-edge.

Thoughtfully investing in smart technologies now allows seamlessly incorporating improvements over time – keeping your laundry business competitive.

Smart Financing Fuels Laundry Business Success

Commercial laundry equipment financing empowers entrepreneurs to acquire the machinery needed to efficiently serve customers and expand services, without breaking the bank initially.

By matching financing solutions to your specific business requirements, you can control costs and cash flow while flexibly growing capacity over time.

With an expert guiding the process, financing that powers your success is achievable.

Now that you understand the available options, take the next step by contacting a specialist like ROK Financial for a free consultation. They can answer all your questions and match you with providers that meet your unique needs.

Investing in your dreams is easier than ever with the right financing partner.

Frequently Asked Questions

What Are the Main Types of Commercial Laundry Equipment Financing Available?

The most common options are traditional loans, equipment financing companies, equipment vendor financing, and lease financing. Each offers different advantages based on your business stage, credit rating, and financial goals.

What Credit Rating Do I Need to Qualify for Laundry Equipment Financing?

Exact requirements vary by lender. Startup businesses may only need a credit score of around 600 for SBA-backed loans. Established businesses often require 650+ for favorable rates from other lenders.

How Much Down Payment Is Typically Required?

Some financing programs offer a 0% down payment or allow rolling the down payment into the loan amount. Typically 10-20% down is required. Well-qualified borrowers can sometimes get financing for 100% of equipment costs.

What Interest Rates Are Typical for Commercial Laundry Equipment Financing?

Interest rates range from 6-15% based on your qualifications as a borrower and the type of financing chosen. Fixed rates under 10% are ideal. Seek competitive bids.

Can I Get Financing if I’m Starting a New Laundry Business?

Yes, SBA loans are designed for startups and newer businesses. You’ll need a solid business plan and capital to cover the down payment. Co-signers may help secure initial financing.

Is It Better to Lease or Buy Laundry Equipment?

Buying has more tax benefits but leasing offers more flexibility. Buying may make sense if you plan to use the equipment long-term. Leasing can better accommodate unknowns as a newer business.

What Are the Pros and Cons of Buying Used Laundry Equipment?

Used equipment costs less upfront but may have higher lifetime costs due to lower energy efficiency and more repairs. Buying used can work well for starting out before upgrading later.

Can I Get Financing for Used Commercial Laundry Equipment?

Yes, some lenders will finance used equipment purchases. You may need to put more money down. Terms may be shorter than new equipment loans. Make sure used equipment meets warranty requirements.

Gerry Stewart
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