Advice on getting a loan.

[soonermajic]

My 2 sons are trying to get seperate loans, to spmit a laundromat. Cost $140k, grosses $65k, but is for business only.
Banks are wanting to do personal loans, 7 yrs, $65k @ 14 ---16%!!!! What the literal blue hel?!!!

That is highway robbery!!!
Any of you guys have some advice for them?

 

[Roz]

My 2 sons are trying to get seperate loans, to spmit a laundromat. Cost $140k, grosses $65k, but is for business only.
Banks are wanting to do personal loans, 7 yrs, $65k @ 14 ---16%!!!! What the literal blue hel?!!!

That is highway robbery!!!
Any of you guys have some advice for them?

Laundromat multiples are higher than other businesses given the equipment investment. Even at say a SBA interest rate of 10% (most SBA rates vary between 8-12% now) they would pay $2400/month or $29K for the year. Expenses are probably $1500/mo so they clear $17K for their time and effort. Guessing that banks see it as high risk and are adding a premium to that loan as the assets are probably not worth much (older equipment that still works). They can always look at a hard money loan as this bank is probably trying to discourage them without saying no. $140K for revenue of $65K seems on the high side from strictly a numbers perspective. I was once told that laundomats should value out at 1.1-1.3 times GR (but that is in general because if you have new equipment I am sure the valuation process is different)

 

[soonermajic]

I did not know that, about gross valuation of laundromats. Thanks for the info.

 

[Rfreeman]

Coach personally I think the issue here is since it is a business only loan what collateral do they have.....used laundromat equipment....what is that worth.....$0.10 on the dollar. Given there is no real asset i.e. real estate to which the bank can hedge their loan against, it is considered higher risk and reflected on the interest rate.

Have they asked the owner about owner financing with a larger down payment to entice the owner to take such an agreement?

 

[soonermajic]

I will see

 

[KYwashywash]

Try getting SBA loan. That’s what I did for my wash and new equipment.