financing

[roundsound]

I have had some troubles financing a small laundromat. Mostly because I'm asset rich and cash poor. I am trying to buy a $125,000 laundromat with about $15k down. Am I just kidding myself trying to do it? The laundromat throws off enough to make the payments + some...Any ideas??

[roundsound]

The bank holds the note on the laundromat to the tune of $100K. I could get the owner to carry the second if needed but I can't get a bank to look at that even. They want much more down like 40%.

[hct1]

I've had the same problem.
Generally, banks want 1/3 or so, down. Maybe the bank could hold a lien on your other assets?
Laundry distributors seem to like to see about $40-50k in cash, when someone is looking to buy a laundromat.

[roundsound]

Thanks for the comments. The banks I have dealt with have been interested in attaching to my other assets. They want to overcollaterize the loan but won't budge off of the cash d.p. I had hoped to use my house for collaterral to avoid so much d.p. but it hasn't worked out that way.

The bank that currently has the loan on the property won't even do it without 40% down. The current owner was able to get 90% from them when he bought it.

It has been very frustrating. We are working through the SBA right now. It appears somewhat promising..

[TKLaundry]

I suppose it would depend on who is holding the note, the seller, a bank or and investor. When I bought my laundromat I financed it through the seller, but I had to give him 50% down at the time of passing.

Dave

[petefritz]

50% down is what I see. Less than that and you run the risk of under captialized. IE, if a big washer Busts the day after closing you need 5k to replace it,, can you handle it?
15K might buy you a 30K mat, netting cash flow of about 10k a year. Expect to work for free for a few years if you try it any other way. It can be done, low money down, if the seller is desperate, but then, what does that say about the mat you are buying?

[roundsound]

Your numbers are actually right on. The difference is I am buying the building too. It is a great location. I just feel this is the right business for me. The biggest problem I keep encountering is that I am already in business for myself. My current line of work (entertainment) leaves a strange look on many banker's faces. If I had a W2 job I am sure I'd have the laundromat in a heartbeat.

[petefritz]

If you really think it will work, get creative! Try a rent to own on the building, lease option with a portion of the rent, even pay higher than market, going towards purchase price, buying the l'mat seperately. Maybe the owner will do a contract for deed, essentaily holding the deed until you pay for the building. Maybe the bank will finance the building, you work out terms with the owner. It might work, but be prepared facing the fact you will be working for "the bank" for a number of years. Owning the real estate of a l'mat is the best way to go if you can swing it. You stated you are "asset rich",, assets can be sold last I knew :)) Going in with money in your pocket is just so much better.

[PeterH]

Whoa!!! What kind of verifiable figures is the present owner giving you to justify his 125K asking price? What's the lease like for the place? Sounds like more background research is needed before you settle on the price.

-ph

[roundsound]

There is no lease on this place. I am buying the property and the laundromat. I did talk to yet another banker yesterday with the help of the SBA. They found a "regional bank" that has money to lend. I met with the banker today and he told me he felt he could get me in with 15% down. I show have a preliminary answer (before appraisals) by Thursday. He was impressed that I had a business plan, plan of action, financial statements and so forth. He also told me that part of my problem was the other banks didn't have much money to loan currently. In other words, if they aren't sitting on cash then you have to be almost perfect in qualifications. I'll post next week as to where I'm at.

[roundsound]

Well, we got our loan at 85%! We will be closing in late January/early February and will be owners of a 'mat. I don't know whether to be excited or scared to death!

[petefritz]

congratulations!
Ask the owner for a list of his suppliers, repair guys, etc. After the closing give them a call and talk with them a little. see what thye have to offer, and how much they seem to want to help. You will need someone to call and ask questions to. Most parts supliers are pretty good about troubleshooting over the phone.

[PeterH]

And get your Home Depot and Sam's Club cards ready!!! Buy only what you need, and keep your business accounts separate from your personal accounts. The biggest purchases I made were all in the janitorial department, so start thinking about how you are going to handle your store and what you might need to run a grade-A operation.

Congrats!

-ph

[roundsound]

Thanks for all of the great ideas...I bet Home Depot and Sam's will be my biggest source of expenditures (after the mortgage) My dad is in the janitorial business (sales) and he is going to help us get the floors stripped and rewaxed. We are going to clean things from top to bottom and take it from there. The customers have given me some great ideas for improving the location so we'll probably look at some of them first.