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How To Start A Laundromat Business

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Venturing into the laundromat business can be a promising endeavor. With the never-ending demand for clean clothes, laundromats serve as an essential fixture in communities worldwide. But like any business, success in the laundry industry requires careful planning, strategic execution, and a solid understanding of the market. If you’re interested in starting your own laundromat business, keep reading to learn how CEDCO can help you kickstart your laundromat business with a SBA 504 loan.  

Is A Laundromat Business Profitable?

Before jumping into the logistics of starting a laundromat, it’s important to address the profitability aspect. The laundry industry is always growing due to its recession-resistant nature. People will always need clean clothes, regardless of economic fluctuations. Additionally, factors such as urbanization, busy lifestyles, and the rise of dual-income households contribute to the sustained demand for laundry services.

95% of laundromats are successful and the average laundromat’s profit margin is around 25% to 30%. The most profitable laundromats invest in higher end amenities that cater to guest comfort and convenience. These include: 

  • Credit card readers
  • Machines with quicker cycles, and energy-efficient features
  • Seating, vending machines, arcade games, and free wifi to help pass the time

Starting A Laundromat From Scratch

There are many steps you can take before needing money to fund the laundromat business.

Step One: Conduct Market Research

Assess the demand for laundry services in your target area. Is there a lack of laundromats near your local college or university? Dorm housing? Apartment buildings? Evaluate any competition and identify if there are any potential gaps in the market. Lastly, figure out what your demographic is. Are you targeting college kids? Or are you targeting renters? Both? Neither? Find out who you’re targeting before opening up your laundromat.

Step Two: Create a Business Plan

Define your business model, including services offered, pricing strategies, and target market. Calculate your startup costs, including equipment, lease agreements, renovations, permits, and projected operation expenses. 

You will also need to develop a comprehensive marketing plan to attract customers and establish your brand presence. This could be anything from posting signs on the side of the road to leaving flyers in community rooms.

Step Three: Secure Funding

When it comes to financing your laundromat, you have several options. Outside of personal savings, you can seek additional funds from investors or through conventional loans. One of the best options for purchasing fixed assets, however, is the SBA 504. 

The SBA 504 loan program is a long-term financing option designed to help small businesses acquire assets such as real estate and equipment. In terms of your laundromat, the SBA 504 could be used to purchase:

  • A Building, or the construction of a new one
  • Laundry Machines
  • Furniture
  • HVAC Appliances
  • Vending Machines
  • Change machines
  • Televisions 

The SBA 504 is appealing because it has a fixed interest rate and offers ample time for repayment. You can borrow up to $5 million for your project (more for energy-efficient endeavors, see below), which can make a major difference for a new business. 

Step Four: Find a Suitable Location

A high-traffic area with good parking and visibility is your ideal option. Make sure to think about its proximity to residential complexes, universities, or commercial hubs. The ideal location will meet any zoning requirements and also have access to water, electricity, and drainage systems.

After you’ve secured your loan, location, permits, and equipment, the next step is to install everything and start marketing your location. Through social media, flyers, and local advertisements, offer promotions, discounts, or loyalty programs to incentivize repeat business. 

Buy A Laundromat Business For Sale With the SBA 504

Maybe you don’t want to start from scratch and there’s a local laundromat listed for sale. You can also use the SBA 504 loan to purchase an existing business. Partnering with a Certified Development Company such as CEDCO.org will help you finance the purchase or expansion of an established laundromat.

Befor buying a laundromat for sale, you will want to be sure you are making a sound investment. Conduct due diligence and assess the business’s financial health, equipment condition, lease agreements, and growth potential. Work closely with your legal team and financial advisors to ensure a smooth and favorable transaction. This can be used as part of your business plan in the SBA 504 application process.

Update Your Existing Laundromat Business

Do you already own a laundromat business but need to finance important updates? The SBA 504 loan can be used for that, too! As long as your purchases fall under the category of “fixed assets,” you can use the loan as you see fit. This may include:

  • Installing credit card readers on machines
  • Upgrading to energy-rated machines*
  • Replacing old furniture
  • Adding more machines
  • Expanding the building or purchasing a new location

*Upgrading your existing laundromat business with energy-efficient equipment is not only an environmentally responsible choice but also a strategic move to enhance operation efficiency and potentially qualify for more. Typically, you can only take out one SBA 504 loan at a time, but if you can prove to the SBA that you’re reducing your carbon footprint, you can apply for another 504 loan.

To prove you are energy-efficient, you will have to show that you reduced 10% less in overall energy consumption and that 15% of your energy is from renewable resources such as solar or wind power.

Open Your Laundromat Today!

Whether you’re starting from scratch, taking over someone else’s business, or upgrading your current laundromat, the SBA 504 loan can help you achieve your goals. In Colorado, CEDCO.org is your top resource for small business financing. Call or go online today to see how you can get started on your SBA 504 loan. 

man and woman unloading clothes at a laundromat
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504 Loan,Small Business
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