How to Open a Laundromat With No Money $$
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Originally Posted On: https://www.insuranks.com/how-to-open-a-laundromat-with-no-money
Laundromats provide people who don’t own washers and dryers with the convenience of washing clothes at an affordable price, especially in an urban setting.
You might be wondering how to open a laundromat, but finances hold you back. Fortunately, you can know how to open a laundromat with no money; ridiculous! Yes, you can, but it will take work. The good thing is that we’ve got some valuable insights into how to start a laundromat business with no money.
One advantage of starting a laundromat business is making a decent annual income without a substantial initial investment. Remember, people love their clothes and prefer doing their laundry themselves. The increasing demand for self-service laundry facilities allows laundromats to make good money, sometimes even after working hours.
Are Laundromats Profitable?
As an aspiring business owner, you need to do your due diligence to determine if you want to know how to open a laundry business that’s profitable. That said, determine the profitability and the risks involved in the industry. With that information, you can decide which business insurance policies you need to cover your business.
We all want a steady income flow annually, and a laundromat happens to be one of the most profitable passive investments that can thrive even in an economic recession–the demand for laundromats never peters out because people must do their laundry..
Besides your concern about how to start a laundromat business with no money, you might be wondering: how profitable is a laundromat business? According to the Coin Laundry Association, the annual income that a standard laundromat generates is approximately $15,000 to $30,000.
That’s decent business income, considering there are over 35,000 laundromats in the US, each boasting a market value of between $50,000 and $1,000,000. That means laundromats bridge a crucial gap in the laundry service industry, and the demand for such services isn’t decreasing soon.
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How to Start a Laundry Business With No Money: Financing Options
You may be thinking of how to start a laundry business, but what’s drawing you back is the lack of enough capital to cater to the upfront or recurring costs associated with establishing and operating the business.
First, you can’t run a laundromat business without washing machines and dryers, and you must think critically about where you want to purchase, lease, or rent the equipment. Remember, there are also other additional costs to think about, such as equipment maintenance expenses to ensure the machines are operating 24/7.
Additionally–and this is one aspect that most new business owners ignore–you need to take out business property coverage and equipment breakdown insurance to protect your laundromat from financial losses that may occur due to equipment damage or theft.
These costs can accrue pretty quickly–usually before the first customer steps into your facility to toss a coin into a washing machine. Luckily, there are many financing options when thinking of how to start a laundry business with no money. They include:
SBA Loans for Small Businesses
The United States greatly supports ventures that begin from scratch. And those wondering how to start a coin laundry business with no money can approach the SBA for a business loan. SBA is a good financing option because you enjoy:
- Low down payments (SBA loan down payments start at 10% only while others start at 20%-30%)
- Business resources and coaching
- Higher chances of loan approval (other lenders will not give a loan unless you can show some existing business documents. SBA doesn’t do this)
SBA offers many kinds of loans. It’s up to you to decide which to get. The table below shows the different types of laundromat SBA loans:
|Type of SBA Loan||Maximum Loan Amount||Needs a Collateral?||Turnaround Time|
|SBA Standard 7 (a)||$5 million||Yes||5-10 business days|
|SBA Small Loan 7 (a)||$350,000||No, unless loan is $25,000-$350,000||5-10 business days|
|SBA Express||$500,000||No, unless loan is $25,000-$350,000||1 and half day|
|International Trade||$5 million||None||5-10 business days|
As mentioned above, the equipment you use at your laundromat facility is why your clients come to your premises. You’ll have to splurge a huge amount of cash to purchase washing machines and dryers. On another token, those machines will likely operate all day long, making them prone to mechanical damage and failures. That’ll require you to have equipment breakdown insurance, which also costs money.
With equipment financing, you can access the funds you need to invest in new and used equipment without placing your assets as collateral or exemplary credit. If you choose this path, you can confidently partner with a vendor to obtain a quote, which you must present to your lender. Subsequently, the lender offers the capital you need to purchase the necessary machinery.
One pro of equipment financing is how the loans are structured. Typically, equipment financing is “self-collateralizing,” which means the equipment you purchase using the loan serves as collateral for the same loan. For instance, if you still need to meet the payment deadline for your new high-volume washing machine, the lender has the right to repossess the equipment in lieu of keeping the collateral.
Angel Investors and Crowdfunding
Another way to fund and build your startup laundromat business from scratch is to approach angel investors or try crowdfunding.
Angel investors are individuals with extra financial resources you can use as a starting capital. They can give the money you need for buying equipment, leasing a space, and catering to other necessities. In return, angel investors expect that you return the money received with interest or become a co-owner of your business.
Crowdfunding is a financing option wherein you collect money from several individuals. You do this through platforms such as Indiegogo. SeedInvest, StartEngine, GoFundMe, and others. The biggest advantage of this method is that you can raise the needed money without upfront charges, accumulating heavy debt, or giving up equity.
How to Start a Successful Self Service Laundry Business: Step by Step
Securing the financing you need to start your laundromat business is just one hurdle you need to overcome when thinking of how to start a washateria business. You must understand the step-by-step procedure of establishing and running the business. Below are the steps you must follow in how to start a successful self service laundry business:
Choose Your Business Model
There are three types of laundromat business models:
- Drop-off/pick-up operation
The conventional laundromat is a coin operation and is the cheapest to start. But if you want to offer more services, attract a wide range of clients, and increase your profits, start a card-op or drop-off/pick-up laundromat.
Do your research before choosing a business model. For example, find out what type of laundromat thrives within your community and the unique services you can provide to differentiate your business from your competitors. Having answers to these concerns will help you make an informed decision on the business model.
Name Your Business Creatively
You can’t simply name your business on a whim. You need to think critically to ensure your business name stands out, is catchy, easy to remember, and reflects your business operations. You can quickly get inspiration by using business name generator tools. We suggest you try Shopify name generator, Wix name generator, and Oberlo name generator.
Choose the Business Form/Structure
There are four types of business structures. Each has its own unique pros and cons, so it’s crucial to choose wisely. Before you make your decision, find out what kind of liabilities you want for your venture or which personhood status you want in case your business is mentioned in a lawsuit.
The four types of business structures include:
- Sole proprietorship
- General partnership
- Corporate organization (C-Corp or S-corp)
- Limited Liability Company (LLC)
We suggest going for an LLC structure because it separates the responsibilities of the laundromat business from you. In other words, you can be compelled to personally pay for the debts and the liabilities of your business.
Get the Necessary Business Permits and Licenses
Most states require businesses that offer laundromat services to have licensure. However, you must show proof of small business insurance before you obtain licensure. The requirements for business licenses vary from state to state. Therefore, ensure you clearly understand your local licensing requirements before filing your application. Other crucial licenses, fees, and permits you must consider before moving to the next step include the following:
- Signage permit
- Impact fees
- Public improvement fees
- Sewer Connection fees
Purchase the Right Equipment
If you’re thinking of how to start a laundromat with no money, you can take equipment financing to purchase washing machines, dryers, and any other equipment or tools.
The best thing you can do with that money is to buy the right equipment to ensure your business runs smoothly without downtime caused by equipment breakdown or malfunction.
Still, it would help if you were strategic. Factor in the size of your laundromat facility, as that will help determine the number of washing machines and dryers you’ll need.
Some common equipment you should have in your laundromat include:
- Commercial washing machines and dryers
- Folding tables
- Washing tables
- Security system
- Ironing boards
- Cash register/ POS system
- Laundry supplies (detergents, cleaning agents, fabric softeners, dryer sheets, etc.
Open a Business Account
While it’s possible for you to use your own bank account for your laundromat. It’s always a good idea to open a business bank account. You’ll need a business bank account to apply for certain loans. Also, doing this means that you can keep personal funds safe if something goes sideways.
Get Business Insurance
Like any other business, laundromats face unique risks that can cause financial losses. Business insurance protects your financial assets in case of a disaster or occurrences caused by a covered peril. It could be theft, vandalism, burglary, third-party claims, and natural disasters.
The policies you choose depend on your unique insurance needs. Generally, some policies you might include in your business insurance include the following:
- General liability insurance–This is the core insurance policy any business can have. It acts as a catch-all for many catastrophes caused by your business operations. If you can obtain just one type of business insurance, this is the one. It covers third-party bodily injury and property damage, personal injury, advertisement injury, and legal fees and judgments
- Commercial property insurance–Protects your commercial property, equipment, and supplies in case of theft, vandalism, and other covered perils
- Workers’ compensation insurance–This insurance covers medical costs, lost wages, and any disability benefits if an employee suffers a work-related injury or illness
- Equipment breakdown insurance–This policy caters to the replacement or repair costs of any piece of equipment that has failed or malfunctioned because of a mechanical failure or electrical surge
- Commercial auto coverage–Grants protection if your commercial vehicle causes an accidents, sustains damage, or is rammed by an uninsured/underinsured vehicle
- Professional liability insurance–Also referred to as errors and omissions (E&O) insurance, this coverage protects you against claims from a client who has suffered a loss because of recklessness, negligence, mistakes, errors, or omissions in your work
- Business owner’s policy (BOP)–This insurance package combines one or more of the insurance policies mentioned above. However, a standard business owner’s policy bundles general liability and commercial property insurance in a single policy, sold at a lower rate than purchasing the two policies separately.
Create a Winning Marketing Strategy
After satisfying all the business and legal requirements, it’s time to open your business to your target consumers. But it’s not easy to get your first customer, so you need to have a strong marketing strategy that resonates with your target clients. You can use various marketing channels, including online advertising, PR, word of mouth, social media, SEO, and directory listings.
Additionally, focus on providing better laundromat services than your competitors. The secret is to conduct competitor research to identify untapped business opportunities. Then, curve out a unique niche in the market so you can effortlessly differentiate your business from the rest.
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How Much Does It Cost to Start a Laundromat Business?
Here’s one question that runs through any aspiring laundromat business owner’s mind: how much is it to start a laundromat?”There are many factors to consider. The first one is equipment and machinery costs. On average, you can expect to incur between $30,000-$100,000 for laundromat equipment and machinery.
When thinking about how much does it cost to start up a laundromat, you need to further think of the cost for business permits. Pricing varies by state and the type of permit. The costliest might be the sanitation permit that costs $500-$1,000.
Your laundromat is a physical location. And so, it’s important to think about lease charges when thinking of how much to start a laundry business. At present, lease rates cost $500 on average. And if you plan to go for a 1-year lease, then you’ll need to invest $6,000.
You might need employees to help keep things running smoothly. This is another factor that you have to ponder about when thinking of how much does it cost to start a laundromat business. Laundry workers get paid $12 per hour. We estimate the annual payroll to be $27,000 for one employee.
Okay with all those factors provided, how much money do I need to start a laundromat? To start a laundry business you’ll need $63,000-$134,000. This is an amount that you can easily source from the SBA.
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