By Beau Eckstein

March 16, 2023

If you're considering opening a laundromat or looking to expand an existing one, securing financing is likely one of your biggest challenges. Fortunately, the Small Business Administration (SBA) offers two loan programs that can help: the SBA 7a and SBA 504. In this post, we'll cover everything you need to know about financing a laundromat with SBA financing.

Understanding SBA Financing

The SBA 7a and SBA 504 loan programs are designed to help small business owners secure financing when traditional lenders are hesitant to lend. The SBA does not lend money directly to businesses; instead, it works with participating lenders to provide a guarantee on a portion of the loan, reducing the lender's risk and making it easier for businesses to secure financing.

SBA 7a Loan

The SBA 7a loan program is the most popular SBA loan program, and it can be used for a variety of business purposes, including financing a laundromat. With an SBA 7a loan, you can borrow up to $5 million, and the loan term can be up to 25 years, depending on the purpose of the loan.

To be eligible for an SBA 7a loan, your business must:

  • Be a for-profit business
  • Meet SBA size standards
  • Have reasonable owner equity to invest
  • Be able to demonstrate repayment ability
  • Have a sound business purpose

SBA 504 Loan

The SBA 504 loan program is specifically designed for businesses that need to purchase or improve real estate or equipment. With an SBA 504 loan, you can borrow up to $5.5 million, and the loan term can be up to 25 years for real estate and 10 years for equipment.

To be eligible for an SBA 504 loan, your business must:

  • Be a for-profit business
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after taxes for the preceding two years
  • Occupy at least 51% of the property if financing real estate

Financing a Laundromat with SBA Financing

Now that you understand the basics of SBA financing, let's discuss how you can use it to finance a laundromat.

Costs to Consider

Before you apply for SBA financing, you'll need to have a clear understanding of the costs associated with opening or expanding a laundromat. Some of the costs you'll need to consider include:

  • Equipment costs: This includes washers, dryers, vending machines, and other equipment needed to operate the laundromat.
  • Real estate costs: If you plan to purchase a building for your laundromat, you'll need to factor in the cost of the property, as well as any renovations or improvements needed.
  • Operating costs: This includes utilities, supplies, insurance, and other ongoing expenses.

Applying for SBA Financing

Once you have a clear understanding of the costs associated with your laundromat, you can begin the process of applying for SBA financing. Here are the basic steps you'll need to follow:

  1. Find a participating lender: The SBA works with a network of participating lenders to provide financing. You can find a list of lenders on the SBA's website.
  2. Gather your financial documents: You'll need to provide financial documents, such as tax returns and financial statements, to your lender.
  3. Complete the loan application: Your lender will provide you with a loan application, which you'll need to complete and submit.
  4. Wait for approval

Working with Beau Eckstein as your commercial mortgage advisor when trying to locate the best SBA financing can be beneficial because he has extensive experience and knowledge in the field. He can help navigate the complex process of obtaining SBA financing and assist in finding the best options for your specific situation.

Additionally, his established relationships with lenders can help increase the chances of getting approved for funding.

Overall, working with a knowledgeable and experienced advisor like Beau Eckstein can greatly increase the chances of successfully obtaining SBA financing.

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