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  • Writer's pictureAnita Kibunguchy-Grant

10 Ways to Raise Start-Up Funding for Your Laundromat

Many people often ask, how did you get money to start your laundromat? And I say, we used multiple sources. Starting a business often requires a significant amount of capital, and finding funding can be one of the biggest challenges entrepreneurs face. As you can imagine, the cost of a laundromat is dependent on the size of the laundromat, whether you’re purchasing the entire location including the building or simply leasing the space. The money you raise will be used to purchase the business which could include all the machines, renovations to an existing laundromat, doing a full construction, purchasing laundry equipment, machine repairs, and more. In addition, you need money for the upfront and variable costs associated with running your business.

This post is dedicated to laundromat owners, however, all the tactics I highlight can be applied to any business you’re looking to finance. Here are some of the most popular ways to raise start-up funding for your laundromat.

Commercial Lenders

Commercial lenders are financial institutions, banks and/or credit unions that provide loans to businesses. They offer a variety of loan products, including term loans, lines of credit, and equipment financing. Commercial lenders typically require businesses to have a good credit history and strong financial performance in order to qualify for a loan.

What’s important to note is that most traditional banks like Chase, Wells Fargo, or Bank of America almost always will not finance laundromats. This is because laundromats are cash businesses which make it difficult to verify income. In addition, there’s the stigma that comes from not having proper financial records and because of this, they are seen as bad investments. That said, banks will do commercial real-estate financing, so if you’re purchasing a laundromat including the building it’s sitting on, then they might be willing to talk to you.

Another area to explore is to find commercial lenders in your line of business. In the laundromat space, Eastern Funding and Dexter Financial are two that you must check out. These lenders will usually fund ~70% of the project, which means you will still need to come up with the 25-30% down payment. Eastern Funding, for example, funds laundromats, dry cleaners, car washes, grocery / convenience stores, specialty stores and other businesses. This funding can be used to buy a business, startup capital, equipment loans and commercial real estate financing. Dexter Financial on the other hand offers a multitude of financing options for the lease or purchase of Dexter Laundry equipment, and so depending on your project, could be worth looking into.

U.S. Small Business Administration

The U.S. Small Business Administration (SBA) is a federal agency that provides support to small businesses. Established in 1953, the SBA offers a variety of programs and services to help small businesses start, grow, and succeed. The SBA's programs and services include: Loans, grants, technical assistance, government contracting, and export assistance.

The SBA can help small businesses get the financing they need to start or expand their businesses and SBA loans are generally seen as the best business loans around. They’re typically issued by small banks and are guaranteed by the SBA for up to 85% of their value. So if a borrower defaults, the SBA offers a promise to cover 85% of the loan’s value. This means lenders take on less risk, and therefore will tend to offer better loan terms like lower interest rates, longer repayment periods and up to $5M which is the maximum SBA backed amount. As you can imagine, SBA loans require incredible due diligence, with exemplary credit needed, a few years in business, plus solid financials and revenues. SBA loans take longer to get approved, again because of the due diligence required by them, so it’s important to plan accordingly.

Personal Savings

Using personal savings is one of the most common ways to fund a laundromat. If you have sufficient savings, this can be a quick and easy way to get started. You can often buy a distressed laundromat with cash at a discount. You can then fix it up and refinance it in order to pull out your cash.

Making a cash offer can also make you more competitive, and beat out other buyers. The downsides of cash is that you get to assume all the risk, unlike when you use any sort of financing. In addition, it can tie up a big chunk of your cash, if not all of it. When an opportunity comes up that requires cash, you usually have it tied up into the business and can’t therefore take advantage of these opportunities. Finally, be careful not to drain your savings completely, as you will need a cushion for unexpected expenses.

Seller financing

Seller financing is a type of loan in which the seller of a property provides the financing for the buyer. This can be done in a number of ways, but it typically involves the seller taking back a mortgage on the property. I’ve heard people talk about seller financing and how striking a deal with the previous laundromat owner can be a win/win for both of you. Often, long time owners with little debt prefer to fund all or part of the deal for them to avoid paying high capital gain taxes. It never hurts to ask a seller what they’re planning to do with their proceeds. If they don’t have major plans, then seller financing could be an attractive option for them, allowing them to carry a note and honestly invest in a business they are very familiar with.

Seller financing can also allow for creativity. You can do a bank loan for 80% and then for the remaining 20%, a seller can finance 10% of the deal and you finance the remaining 10% which can come from savings or raised through friends and family. Seller financing can be a good option for buyers who have difficulty getting a traditional mortgage from a bank. It can also be a good option for sellers who want to sell their property quickly and avoid having to pay a real estate commission.

Friends and family

Financing from friends, family and other investors is a common way to raise money for your laundromat. It can be a great option if you have a good relationship with your friends and family and they are willing to lend you money. You can structure this as equity financing or debt financing. Equity financing simply means structuring a deal where your company sells ownership in itself to investors in exchange for capital. Equity financing can be a great way for a laundromat owner to raise capital, however, it also comes with some risks. When a company sells ownership, it gives up some control to the investors. This can be a problem if the investors have different goals or ideas for the company.

With debt financing, I see this as a form of creative fundraising. When we started Safi Laundry, we did not want to give away any equity, so we did debt financing, by structuring a ‘loan’ with a minimal buy-out amount, and an x% ROI after one year. Given that businesses do take some time to truly start making money, you can structure the payback period accordingly, and maybe even have it spread out over a 2-3 year period at an agreed upon rate of return. And yes, this is where a solid, signed agreement becomes crucial. For both equity and debt financing, make sure to work with a lawyer for the proper agreements, with any defaults in payments appropriately outlined. While inability to pay back could cause a rift in the relationship, paying a friend or family or investor back their money as agreed, can actually strengthen the relationship.

It’s, therefore, important to approach this type of financing with caution. Have a frank conversation with your investors about your business and your plans for repayment. By doing your research and planning ahead, you can minimize the risks and maximize the benefits of these types of financing options.

Brokerage Account

If you’re like me, then owning shares of stock in public companies via a brokerage account is pretty common. A brokerage account like eTrade or Vanguard is a type of investment account that allows you to buy and sell securities, such as stocks, bonds, and mutual funds. Brokerage accounts are offered by a variety of financial institutions, including banks, investment firms, and online brokers. If you’re looking to raise money to start your laundromat, then you can sell securities that you own in your brokerage account and access cash that way. When you sell a security, you are essentially selling your ownership in that company or other entity. You will receive money for the security, which you can then withdraw from your brokerage account and use it to finance your venture.

Home Equity Line of Credit (HELOC)

If you’re a homeowner and you’ve owned your house for several years, then it’s worth looking into a Home Equity Line of Credit (HELOC). A HELOC is a type of loan that allows you to borrow money against the equity in your home and then you can use that money to start your laundromat. A HELOC is similar to a credit card, in that you can borrow money as needed up to a certain limit, and then repay it over time with interest. HELOCs typically have a fixed interest rate for an introductory period (usually 10 years), after which the rate may vary with market rates. This means that your monthly payments could increase after the introductory period.

To qualify for a HELOC, you will need to have good credit and a significant amount of equity in your home to be able to pull out cash. If you are considering a HELOC, it is important to weigh the pros and cons carefully. A HELOC can be a great way to access the equity in your home to fund your laundromat.

Another option is to do a cash-out refinance of your home, which means you’re taking out an entirely new loan greater than the balance of your old loan, you then pay off the old loan and keep the difference for your laundromat.

Private Lenders

Private lenders are individuals or companies that lend money to borrowers outside of the traditional banking system. They can provide a variety of loan products, including personal loans, business loans, and real estate loans and these can be used to finance your laundromat. Private lenders typically have more flexible lending criteria than traditional banks, which means that they may be willing to lend to borrowers who have poor credit or who are self-employed. However, they also tend to charge higher interest rates and fees than traditional banks.

There are a number of reasons why someone might choose to work with a private lender. For example, if you have poor credit or are self-employed, you may have difficulty getting a loan from a traditional bank. Or, if you need a loan for a specific purpose, such as buying a house or starting a business, you may be able to get a better deal from a private lender.

Retirement Funds

Borrowing against your 401K or IRA account is another source of funding you can tap into to start your laundromat. Of course the money will need to be paid back, just like any other loan, but if you’ve been diligent about putting money into your retirement account, then it’s worth looking into how to best access it. Borrow only what you really need to and be sure to borrow only what you can afford to pay back each month.

It's important to note that there are potential tax consequences for withdrawing money from retirement funds before age 59½. You may have to pay income taxes on the withdrawal, and you may also have to pay a 10% early withdrawal penalty. If you are considering withdrawing money from retirement funds, it's important to talk to a financial advisor to understand the potential tax consequences and to make sure that it's the right decision for you.


Government grants and private foundation grants can be a valuable source of funding for businesses. Once you have found a few grants that you are interested in, you will need to submit a grant proposal. A grant proposal is a document that explains why you are requesting a grant and how you plan to use the money. The grant proposal should be clear, concise, and well-written. It should be tailored to the specific grant that you are applying for. After you have submitted your grant proposal, you will need to wait for a decision. The grant application process can take several months, so it is important to be patient. If you are awarded a grant, you will be notified by the grantor. I am not too familiar with grants in the laundry business, however, it doesn't mean they don't exist.

In conclusion, there are many options for securing funding to start your laundromat, including; commercial lenders, personal savings, friends and family, brokerage accounts, HELOCs, seller financing, private lenders, grants and more. Mixing and matching these options will allow you to raise the money you need to start your business. At Safi Laundry, for example, we used Dexter Financial, debt financing with friends and family, personal savings and selling shares in our brokerage account.

The best approach for you will depend on the specific needs and circumstances of your laundromat. It's important to carefully consider the pros and cons of each option and to seek advice from a professional when necessary. Finally, make sure to paint a vision of your business when raising funds. If anything, this really helped sell our dream and helped us secure the money we needed. In the spirit of sharing, here’s the deck we put together that helped us sell our dreams - names and financials are removed. Enjoy!


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