CHICAGO — In recent years, laundry operations in need of new equipment or upgrades have found it more difficult to obtain financing, according to some industry experts.
That has left some owners and managers in a bind to replace outdated or broken machinery, or to start up a new plant or an on-premises laundry (OPL).
And the owners and managers have had to find new, creative ways to finance capital purchases.
The method that has made equipment purchases possible when commercial banks wouldn’t provide financing? Manufacturer-sponsored finance programs.
UNDERSTANDING THE INDUSTRY
“The mere existence of today’s manufacturer-sponsored finance programs is the result of an unwillingness and lack of understanding by typical commercial banks 25 years ago,” says Kirk Stone, vice president-vendor group, U.S. Capital Corp. “Lenders like U.S. Capital and our competitors know the laundry business and spend the majority of our time and resources assisting owners and prospective owners with competitive financing solutions to help them get the equipment they need to operate their businesses efficiently. Very few banks will offer start-up financing unless they secure the loans with mortgages on other unrelated properties, etc.”
“Equipment companies have developed relationships with third-party finance companies,” adds Keith Ware, vice president of sales with Lavatec Laundry Technology. “This allows laundries to deal with lenders that understand the equipment, its value and life cycle.”
Tina Gough, UniMac finance brand manager for Alliance Laundry Systems, says that for the laundry industry, it’s difficult to determine the value of the business and how much that equipment is worth.
“Manufacturers that specialize in the laundry industry, they know how to analyze that market and the value of the business, the equipment and all of that,” Gough says. “They know how to lend against that piece of collateral easier than a commercial bank does, or a financial institute or market does.”
“We understand the business and know what questions to ask,” adds Stone. “Our credit box tends to be a little wider than a bank. For experienced operators, it is possible to borrow 100% of the equipment order with very limited financial information required.”
Gough says that for the customer, a laundry owner or manager, this knowledge makes it easier during the financing process.
“[Customers] don’t have to jump through as many hoops and processes with manufacturers of the equipment,” she says.
Pamela Kuffel, international sales manager and consumer financing specialist with Continental Girbau, adds that manufacturer-sponsored financing is convenient because financing, service, support and warranty are all provided under one umbrella. Plus, she says that manufacturers have extremely competitive and flexible financing available.
“At Continental, we offer the full gamut of services. Financing is one component that makes the purchasing process more seamless. We have the relationship with the lender, distributor, and the customer. We can help bridge any gap between them,” says Kuffel. “This helps with the strength of each deal.”
For new investors, Stone says manufacturer-sponsored financing is the best solution to help them get into the business. Manufacturers know how to evaluate new projects by using tools such as demographic reports, cash-flow projections based upon the demographic information for the proposed location as well as analysis of the competition surrounding the location, he says.
“Your typical bank makes decisions on existing revenues of a business, which do not exist with a start-up project,” Stone adds.
Kuffel says, “I would argue that the financing through the manufacturer helps build a strong case for the financing, as we usually have visited the site, customer, business, etc.”
Check back Thursday to read about the ease of manufacturer-sponsored finance programs.