Darn,another Newbie

[Paiscool]

Hi,folks,I am someone who has wanted to own a coin laundry for a long time.I have and still am doing a lot of research to get where I want to go.I have read many of the posts here and there is alot of good info.I have a few questions?

1.I have about 40K cash and another 12k for living and cash flow.My credit score is in the 700's.Is this enough?Will I be able to get a loan for another 60 to 80K to finance the rest of a mat?

2.I have a chicken and Egg question.I cant go to the bank for a loan(assuming I have a chance with question 1) until I have due diligence and a business plan but how do I know if I spend the time and money to do the due diligence that I will get a loan?

I am planning on making this a fulltime job for me and the wife,not an absentee owner.
Thanks for taking the time to answer this.I know you are all busy people.

[mike]

I would say that you are better off finding a mat at a reasonable price, and talking the owner into taking a "balance of sale" of 50% or so of the price.
You may have to look at ten deals to find one you feel good about.
Don't overextend yourself, keep a margin of error.

I think you are probably wasting your time with banks, unless you have substantial collateral.

I think if you wait for the right deal, it may be possible to get a smaller mat for that price ($70,000. pay half now, half over 5 years, and live frugally (we've all done it !)

Don't be in a rush, take your time, wait for the right deal.

good luck. (run the numbers by this board, strength in numbers)

[JAG]

After you read every single post on this forum read everything you can about this business and subscribe to CLA's monthly magazine, The Journal (it's free). Go visit every laundromat in your area and do your wash there during the week and on the weekends (I didn't even use my own washer/dryer for almost a year while I was looking). Bring a notepad and pen and write down pros and cons about each laundromat.

Since it does not make sense for you to start a laundromat from scratch, find an existing laundromat in a good location (check the DOT website for traffic flow and the census bureau for deomgraphics-you want an area with a large % of renters and older homes and apartments that may not have Washer/Dryer hookups) that has upside potential through a little TLC. If you find such a laundromat, contact the owner and tell them you are interested in purchasing the laundromat.

If the owner is interested in selling, ask for at least two years worth of utility bills (water, electric, gas, sewage), copy of lease (need at least 15 years), repair & maintenance log. Write down all of the machines (including size and serial number). Work with the seller to come up with a fair price (around 1x gross income or 2-3x net for a laundromat needing repair and refurbishment). If you can agree upon a price, ask the owner how much they would consider financing over a 3-5 year span. If the seller will not finance, then..

Write a business plan outlining the laundromat in question. Include a list of the equipment, age, serial number, retail price when new (I never include market value because it is close to nothing!!!). Print out pages from the website (beware of any copyright issues). Include current and historical income statements for the laundromat. Also include projected income from laundromat after you take over (for some reason I always project I will do better than the last guy). Print it off on nice paper and put it in a three ring binder.

Make sure your credit is in good shape. Go to a smaller, local bank. Tell them you have $40k in cash you would like to deposit in exchange for financing the purchase of the laundromat. If the bank will finance a 100% of the purchase and give you a line of credit for $20k, you will buy a two year CD through the bank for $40k.

If your credit is good and you have all your ducks in a row, it would be hard for the bank to turn you down. You will make little to NO cash flow from the laundromat for a while. However, you will have a line of credit that will help you remodel. When your two year CD has expired, the bank should release your $40k plus minimal interest back to you. Keep the money in the bank in a saving account (even though the bank will probably not need it as collateral because you have paid them on time for the past two years). Use the $40k to remodel and keep a cash reserve. Hopefully, the remodel will provide a little cash flow until you pay off your loan a couple of years later.

My methodology is a lot riskier than the other great advice you will get on this board. The familiar names on the board have been at it a lot longer than me so I take their opinions to heart. So should you. I can only tell you what has worked for me. I bought my laundromat with no money out of my pocket. I have been slowly remodeling my place over the past two years and last month was the first month it made any money. However, my laundromat and the business gets better every month. I have another job to support me and do not expect to make any money on the laundromat until my loan is paid off in three more years.

Your situation is a little different than mine, but if you educate yourself and listen to the advice of everybody on this board, you will be successful. GOOD LUCK.

[buddy]

If you own a house and have some equity in it I prefer Home Equity Line of Credit (HELC).

With HELC you get the best interest rate usually at Prime. The second advantage is that there is no fixed monthly loan payment you are only required to pay back the interest portion every month so it gives you some flexibility. It is not a traditional loan so it is always available even if you re-pay all the credit line you can use it again in the future. You pay interest only on the amout of credit line you use.

This is ideal because let's say if you are in a crunch for couple of months then you just pay the interest portion for those two months. When you have extra cash flow, you can pay larger payment to bring down the pricipal on your credit line.

I got my Line of credit about a year ago. It was approved over the phone. I have line of credit available whenever I want to use it. I haven't used it yet but if I decide to buy another Laundromat I will draw on it or if I want to replace equipments or remodel my MAT I have that Line of Credit available to me. Currently it is not costing me a penny since I haven't used it yet.

[cesar]

Jag,
Nice post, good advice.

[mike]

I envy you guys your banks !

When I leave my bank, they count the pens, and make sure I didn't cut any of the chains that they're on

And for no good reason, other than "laundromats are not on our list of successful businesses".

[David]

All but one bank in my town wanted much more of a down payment than my business plan called for. I was asking for a 82% financing. Only one bank actually READ my BP and that's who loaned me the money.

[Andy]

I will just reiterate what Mike said below as it is a key piece of advice to adhere to while considering any transaction:

be patient

[pete f]

I am in the same thought as Mike, and that is how I bt all my mats, 50% down, owner finance for 3 to 5 years. I never had patience for bank paperwork, and a good mat will sell before you have a BP filled out. Cash talks, BankS walk..
There are some here who have done much better at banks, it may depend on your market. Jag has an interesting approach, I may try that down the road.. If no real estate involved then banks are not to interested in a new venture,, as a rule. But some here have done SBA on equipment and buildout. The market again, local custom.

[Lar Hylobates]

Cash is King. Banks are a pain in the ass.

[Kitty]

Any idiot knows cash is king, however, where there is a will there is a way......Most potential buyers with good credit, and the sales skills to sell them self to a banker can get a loan. Many real estate deals can be made without cash down.

[Gary C]

come on kitty, Have you tried to sell your self to a bank. Some times if not always they are a pain in the a#@. If no realestate is included they will laugh at you. I have very good credit and collateral and when I was starting my place they looked at me like I was from outer space. This has happened a few times. Different business. They have told me flat out we are not in the venture capital biz. The other guys are right owner finance or lease co. at high interest rate. It can hurt a little but it works.

Gary

[Fred50]

Gary C,

I'm with you on this one, but maybe it's that we have similar markets from a banking perspective.

I even have senior contacts at some of the big banks in NJ and all that did was get me meetings with senior loan officers. As soon as I mentioned laundromats that was the end of it. They gave me the courtesy of listening, but never returned the calls.

One deal that I was working on included real estate, so that piqued their interest but that was the only one.

[Kitty]

Sorry guys, I have done just what I suggest three times. One with a business (no real estate included) and twice on real estate. I have made the deals all while keeping my cash. However, my market is not the metropolitan area, we are small tourist town approx pop 80k for entire county.

My father taught me that banks are in business to loan money, and loaning money is how they make money. Collateral is your know how and your charachter..........There is creative financing available with every lending institution, of course it helps who you are and who you know. But, it can be done.

[Quartermaster]

Every time I went to a bank to get a business loan, without execption, I had to have enough collateral to show I didn't need the loan in order to get the loan.

The banks just wanted to cover their rears. They need to look at each loan from the perspective that this person will (not may) default and the bank will end up with equipment and real estate that they will have to unload at 10 cents on the dollar.

There is a saying out there in the real world:
'Them who has, gets.'

Them who has (money), gets (money).

[Kitty]

Yes, lenders want collateral. But, that quarentee, the security for which one may requests financing for can often be something other than the almighty dollar.

Determination and persistance is often needed to capture a lenders attention, as is a sound business plan when seeking financing. My point is collateral can be other than equity, stocks or hard cold cash.

[Gary C]

Kitty What type of biz was it? And if you have a bank that will lend on your know how I want their number. I have know how, carecter and colateral and that just does't cut it with the banks sometimes. How ever I am not a minority and that will make a differance. No lectures please on the minority issue. It's fact.

Gary

[Kitty]

My biz was worse than a mat, it was a luncheon restaurant. I purchased that by selling myself to the bank, even obtained a little working capital, on my signature! 75K...... Too bad the biz wasn't as good as my BS, persistance and hard work.

When we closed on my new 2500 sqft home we went to closing with $48.14 at a competitive fixed interest rate. We bought the lot with no down payment either. We kept the funds from the previous home and did not have to use those funds in any way with the newly built house.

Minority? Then get your wives to get your financing. Because it can be done.

[Lar Hylobates]

Cash is king!!!

Will you people please work on the spelling. I can't tell if it is guarantee or quarantine...I like the latter./

[mike]

Kitty, I see your located in NC, does that stand for No Cash ?

(I guess AK would be All Kash:-)

[NJ Jon]

Kitty -

Just tried to send you a PM, and got a message your mailbox was full.


Cheers,

NJ Jon

[Kitty]

Im a popular girl, Ill clear it right now. Thanks Kitty

[Gary C]

NO WAY, I own the biz. If some one else gets the financing then I have to share :( I finance everything now at 100% But starting out it is not an easy thing to do.

Gary

[Paiscool]

To basically make this simple,from what I have read here:

1.Take my time,be selective about the mat I try to buy!

2.Maybe I can get a loan,maybe not.If possible owner finance some of it.Use the least amount of my money if possible or pay cash for it all.

I appreciate all the responses.I am going to a SCORE seminar to see if I can get an insight into the financial part.Since I am a minority for SBA (Vietnam-Era Vet) ,I still might have a shot at a loan.I am definitely going to do this and I appreciate all the info on this site.

Good Luck to everyone and Thanks

[JAG]

There is no reason why anybody should be denied from a bank loan if they have a clear and concise business plan, show knowledge of the business and have decent credit. With SBA loans, the banks are guaranteed almost 70% of the loan by SBA in case of default. Show the bank your long lease agreement, a list of all of the equipment and the RETAIL PRICE of this equipment and your cash flow projections for the next three years and you should not have any problems getting close to 100% (if not more) financing from a bank. However, you should target the smaller, community banks. I went to three banks: a small, local commercial bank, a small, local retail bank and a regional retail bank. All three of them would finance me at 100% even though I didn't own my own home (have no assets), had limited savings and okay credit. I simply overwhelmed each person with my knowledge of the industry (most of which was gained from this website, other resources on the web, and months of studying every laundromat in our area). I showed the banks all of my notes on all of my competition, Dept. of Transportation information, Census Bureau statistics on demographics. Each banker told me they had made million dollar loans to businesses with far less planning and research.
My loan is for seven years at prime plus 2%. It is about 6% right now.
This allows me to make a little bit of cashflow now. I could use this money to pay off the loan early, but I am reinvesting every single penny into rehabbing the l'mat. My goal is to have a completely rehabbed, debt free mat in five years. The best part is the only thing the laundromat would have cost me during this time is sweat equity.
For those interested in buying a laundromat, but do not have money to put 20 or 50% down, take a chance. Learn everyting about this business. Write it down. Present it to an SBA approved lender bank (small and local bank). Impress them with your knowledge. Find a laundromat that needs some remodeling but has good potential and is close to where you live. Buy it for the right price. Work your butt off for 5-7 years and manage your cash like Scrooge. Keep the place clean and bright and in working order until you get a little bit of profit. Put every penny of profit back into the laundromat. Keep your customers happy. Cross your fingers and hopefully the hard work and a little luck will enable you to have a free and clear, modern laundry that throws off enough cash flow so you can quit your day job or buy a 2nd laundromat for cash (because cash is king). This way isn't for everybody, but it is the only way for some of us.

[Lar Hylobates]

Jag, well put. I think you will often find it difficult to get anything but a proposed lease agreement as most landlords will require that you put your money where your mouth is before they spend alot of time with you.

This again is an example of why cash is king. Same way that a broker likes an offer, whether binding with concession and conditional clauses or not BEFORe they start jumping the hoops.

Obviously if you have no money you must do anything possible to push it along. Good luck monkey is all I have to say!

[Gary C]

JAG, Sorry I just don't buy it. It's not that easy and most banks will not lend money on new ventures that easily if at all. If you have a banker that will do that for you don't let them out of your sight. I have been self employed for 14 years and never been given money easily. If your family has a lot of money in the bank or they are looking to lend to a target area or group then maybe. Infact they will then throw money at you, but in most cases that is not the case.

Gary

[Duane]

I am with JAG on this.


Good business plan, solid research, good credit. - No problem.




No business plan, some research or questionable credit. - Creative financing.

[Kitty]

Where there is a will there is a way. It can be done!

[Gary C]

I am not saying it can't be done. Just that it's not the most common way. and definatly not the easiast.

Who on this board financed most if not all of their l'mat through the bank on a stright up loan? Meaning not a second on their house or other property. And at a leased location. Just on the business.

Gary