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How to buy an existing laundromat? but don't have any money for down payment.

What are the options for someone who is looking to buy an existing laundromat and know there is a cash flow where I would be able to paid the loan and other bills on time. If a seller offer financing option would the seller still sell the business to someone who never own a laundromat business?

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Answers (3)
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The BAF Group LLC

Milovan, asking the Accountant to review five (5) years is probably overkill; three (3) years in normally sufficient. Unless the laundry owner discloses all of his Profit to the IRS, the SBA is not going to lend on the basis of (what they would consider to be) an overpriced, cash business. The Tax Returns have to be in coordination with the amount of the loan, in any business you purchase. And as for buying a business, it is not ALWAYS the only way to go. You need to understand the business, understand how much it would cost you to start one from scratch and how long it would take you to bring it to a profit. Then, you compare that against the cost of buying an ongoing business. Frequently, it is better to buy - but not always!

If the Seller will finance the deal, it will depend on how sophisticated he is, and how tough his attorney might be, to determine how they will treat you. Some are just as tough as a bank. Others are more relaxed - and that can depend on how good the business is and how quickly the Seller wants to sell. If he wants to dump it, again you need to beware. Look at his motives and determine whether he is just a nice guy, or whether no one else wants the business because it is a dog!!!

Also be aware that when you get a loan from the SBA, you would need anywhere from 10% to 25% down. With a Seller doing the financing, he might be looking for far more money, up front.

Mar 30, 2013
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Blue pandora LLC
Queens County, NY

Thank you for responding. I have done the research and understanding their is a lot of questions that may not be answer. I do understand some business owner would report insufficient cash flow on there tax return. Here is the story about me. I want to start a business but I read on SBA website that buying an existing business would be a better way because the business is already establish with clients. If seller offer financing option- what would need to be done? Meaning- would the seller take a chance on a new business owner? would the seller request information on the buyer in order to make a decision.
I am looking into SBA small business loans. I know I would need to hire a lawyer and Accountant. I would have the Accountant to review the 3-5 years of the tax return and other financial records including profit and loss.

Mar 30, 2013
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The BAF Group LLC

First, most - but not all- laundries are sold on a cash basis. Many laundry owners do not appear to be fully open with claiming all of their cash earnings, to the tax authorities. So when you go for a loan, there is normally insufficient cash flow on the Tax Returns for the lender to qualify the business for a loan. The only way to get financing is either from the Seller him/herself, or by paying cash.

Second, there are a LOT of cash Buyers out there, for laundries. The chances of getting a Seller to provide you with financing is not good, unless the laundry is not a great business anyway, and then you have to ask yourself whether it is worth it! Will the Seller offer it to someone without experience? The same questions apply: Laundries are very hot purchases, so if he cannot find someone with experience that wants to buy it, why not? Is there a problem that you do not know about? You need to study it with extreme care!

Mar 30, 2013

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