What percentage have you managed to get financed?

[talkative]

I guess this is fairly anonymous so I guess this shouldn't hurt to post.

I've got 100K in cash.

I occasionally see mats for 200-400K with cash flow from 80-180K. Very rarely do owners seem interested in financing.

Alright that's a big vague so.. If a mat makes 100K, sells for 250K, and I've got 100K, think a bank will give me a shot? (great credit, long term employment history)

Or a mat makes 150K, sells for 350K, and I've got a 100K?

Am I in the ball game or do I need to lower my expectations?

[DuboisLaundry]

financing is not especially my area of expertise, but I do know that the higher percentage you finance, the more of your income will go to debt service. At some point it could become "too much" - meaning the monthly income from the mat can't pay the both the mortgage and the recurring bills.

Mine was 50% cash down payment, and seller holds the mortgage for the other 50 amortized 10 years at 6%
I would not have been comfortable financing more than 50%, but maybe you will be.

[SmartCard]

A bank is concerned with collateral. Whats your house worth? Prepare to use it for collateral. If you're confident that you are buying a solid business with adequate cash flow, put together a buisness plan and and make an appointment with a loan officer. Ask about an SBA loan.

[pete f]

Owners do not advertise financing, just make it part of your offer. I bought 3 with about 50% down, most 5 yrs, 8%. One I bought I gave the owner a 2nd mortgage on a condo I have for the full purchase price, saving my cash for a remodel. The place was full of junk, he knew it was not worth much, and was not to hot on holding a note on it. A home equity, or some form of real estate is best to loan against, but do not be afraid to make an offer with 1/2 down and ask the owner to carry the rest for 5 years. I never tried a bank.

[William]

I think you can get a loan. $100k down is a good downpayment. You might have to shop around, some banks like laundromats and some don't.

[talkative]

I'm impressed with the replies fellas.. All different angles, all different experiences.

And you cheered me up. Thank you. I've spent the last 10 years saving and ignoring life's joys to get to this point. I have a more positive outlook now.

Just FYI.. the 100K was my house.. which I sold. There is no more, except for my IRA, which I've got no intentions of tapping.

-- John

[pete f]

I'm impressed with the replies fellas.. All different angles, all different experiences.

And you cheered me up. Thank you. I've spent the last 10 years saving and ignoring life's joys to get to this point. I have a more positive outlook now.

Just FYI.. the 100K was my house.. which I sold. There is no more, except for my IRA, which I've got no intentions of tapping.

-- John


My mats and the real estate they sit on ARE my IRA!

[Silent Roo]

Generally in a bank loan you are looking at a term of 7-10 years. Most banks want to see three years of records for a business loan. They would also Expect 20-30% down depending on your histroy and situation. Depending on the necessary repairs and cashflow these numbers might change however these are a good rule of thumb.

[skyfather]

I too am looking to get into the laundry business. Let me share what I’ve found so far.

Banks: Most banks do not like making loans to people new to an industry. Even if you buy an existing business with a demonstrated cash flow and have significant business experience, they consider you a startup. Banks generally offer the best interest rates without points, but are hard to get. Typical term length is 5 years. Don’t count on a regular bank loan. For the few that do, you need 50% down. Positive cash flow needs to be documented. Meaning, no tax return from the seller, then no loan.

SBA: It’s much easier to get a loan from a bank if it’s guaranteed by the government. The good news is that you only need 20-30% down with term length of 7-10 years, but you’re going to pay points with a slightly higher interest rate compared to standard bank loans. Positive cash flow needs to be documented. Meaning, utility analysis not sufficient. SBA likes to have collateral in the form of your house.

Owner financing: Face it, most owners don’t want to finance unless they have too. You’re going to need at least 50% down over 5 years tops in most scenarios.

Equipment manufacturers: They finance used laundries too. Don’t know how easy it is to get, but very high rates with 35% down over maximum of 7 years with points.

Lastly, most lenders like to look at 2 major things: ability to repay and collateral. Expect the bank to like a cash flow coverage of anywhere from 1.2 to 1.5 (meaning cash inflow divided by cash outflow). They want to make sure the business you purchase has the ability to service the loan so this needs to be documented, as in tax returns. In case you can't repay the loan, they may want collateral to back up the loan. The equipment value the bank assigns will be half the depreciated value. That’s all you’re going to get from the proposed mat.

So those are the basics. Run some numbers and see how they compare based on interest rate, term of loan, purchase price, cash received, downpayment required, and cash paid out. Is there enough to service the loan and your take home pay? And don’t forget working capital and the fact that the numbers given you by the owner will be inflated.

[detlaundry]

I used a house as collateral as smartcard suggested at the time to build a mat in an area i was confident in. However, i would try to avoid an sba loan if possible. Large loan closing costs, early loan retirement fees, etc make the effective interest rate on your loan much higher than the stated rate. My situation required me to use an sba loan as my down payment was small and the loan allowed for 6 months of interest only payments which was enough time to build cash flow.

The Five C's of Business and Commercial Financing
Whether a dream is establishing a small business or a giant corporation there are a number of ways for that dream to turn into a reality. Many times that dream does not come true due to lack of money. There are many individuals or groups of individuals who develop an amazing, unique, and profitable business plan; however, without the proper financing that plan rarely makes it off the ground. By understanding the five C's of business and commercial financing a well-established entrepreneur could obtain the financing needed to start their own business.

The five C's of business and commercial financing is used by financial institutions and investors around the world. The five C's of business and commercial financing is similar to a set of guidelines. They are used to determine whether or not an existing business or business plan will succeed. Before approaching a creditor, all business owners and new business developers are encouraged to review the five C's of business and commercial financing to determine if their business will past the tests.

1) Collateral - Before a financial lender provides financing to a business owner they will want a guarantee that they will receive their money back. If a business owner is just getting started or does not have any profits to show they may be required to obtain a secured loan. Collateral is used in a secure loan to reassure financial lenders that they will be getting their money back, one way or another. A home, a vehicle, and office equipment are popular items that are used for collateral when trying to obtain a business loan. An insecure business loan does not require collateral. Business owners with a solid business or personal credit may qualify for an insecure business loan.


2) Capacity - A business owner's capacity to pay back money that is borrowed is also taken into consideration when seeking business financing. With a standard credit check a financial lender can determine the number personal or business loans that were obtained and if they were fully repaid. A business owner with a history of making loan repayments on time is more likely to receive financing for their business than a business owner who regularly makes late payments or no payments at all.

3) Capital - Capital is often looked at as the amount of money that you have invested into your own business. A financial lender or an investor may be curious as to why you are seeking financial assistance before using your own assets. Many lenders or investors also want to know if you plan on using your own money to help your business succeed when needed. In addition to your willingness to use your own assets, all financial lenders or investors may verify that there are assets to use. To verify the availability of assets, many lenders request a credit report or financial records.

4) Condition - The conditions of the economy and the market are also taken into consideration when obtaining financial backing for a business. Financial lenders and investors are more likely to lend or invest money in a business that will succeed in today's market. Businesses with a poor financial outlook in the next five to ten years are not likely to receive financial backing.

5) Character - Before a business loan is obtained or an investment is made, lenders and investors need to be sure that they can believe in the character of the business owner(s) and business. In addition to character, the borrower's ability to succeed will be closely examined. Business owners with the proper amount of education and relevant work experience are more likely to receive favorable responses. Having a positive personal attitude and a constructive business plan is a surefire way to impress all financial lenders and investors.

When seeking investments or financing for a business, it is important to remember the five C's of business and commercial financing are not mandatory; however, they are used on a regular basis. What is great about the five C's is that all categories leave room for improvement. Business owners and entrepreneurs who develop their business plan around the five C's of business and commercial financing are more likely to receive financing than those who do not.

[talkative]

I had been out traveling for a while, searching for new areas to live in. I see the newbie area has been pretty quiet. :)

Once again though, as I haven't visited this for a bit, is how impressed I am with the very well thought out answers provided here.

John