An Alternative Financial Option

Laundromats offer a mix of different services depending on customer demand and preferences. From a fully equipped wash, dry, fold service to the simple self-serve options, customers will always appreciate having a laundry facility nearby. Depending on the services you offer, you’ll need to invest in different types of equipment. You can’t have a self-serve model without the right integrated payment machines, and you certainly can’t offer to fold clothes without some folding tables. However, as a new business owner, you will probably have a strict budget to stick to. Opening a laundromat isn’t one of the most wallet-friendly ventures when you are just starting out. You need a way to be able to install the latest washers and dryers into your store, without taking the hit from the hefty upfront costs. This is where leasing equipment comes in.

In this blog, we will cover an often-overlooked aspect when starting up a new laundry business: laundromat equipment leasing. This alternative option is very beneficial for any laundromat owner, and a cheaper method compared to buying equipment outright.

What Is Equipment Leasing?

Equipment leasing is where a business can rent equipment out for a specific amount of time, instead of owning outright. As a laundromat owner, this means that instead of buying washers, dryers and other tools, you can enter a lease agreement with a company or vendor who will give the machinery to you for a set monthly fee. 

This is also a more cost-friendly way to get a hold of the latest and more efficient machines, considering the more modern options will come with an expensive price tag. The company that you lease the equipment from will retain ownership of the items, while you will have the rights to use the equipment during the agreed lease duration. When your lease term comes to an end, you will typically have a few options to either renew the lease, buy the equipment outright or, return it and start a new lease with something different.

Benefits of Leasing

Lower Upfront Costs

One of the top benefits when it comes to leasing is the lower upfront costs. Purchasing new laundry machines can be expensive, and with the average laundry facility holding between 40 and 100 washers and dryers with each machine costing between $800 to $2,600, you can imagine how much money you would initially need to spend. On the other hand, when you lease these machines, you can avoid this upfront cost, freeing up more of your budget for other important plans such as store renovations and maintenance.

Flexible Financing

Leasing gives you the opportunity to be flexible with the equipment you use, something that can not be done so easily when you purchase machines outright. As customer preferences change, the industry and technology has to evolve with it. For example, as more people begin to pay for services using cards and digital payment systems, you’ll notice that cashless machines are becoming more popular. When you sign a leasing agreement, many plans will give you the option to upgrade to newer models either at the end of your lease term or even during the lease period. Being able to swap out one machine for another helps you stay competitive, providing your customers with the latest high-quality equipment. When you buy laundry equipment outright, you are pretty much locked for at least a couple of years to make the money you spent worthwhile.

Repair and Maintenance

One other benefit to leasing is how most agreements will include cover for regular maintenance and repairs, helping make sure that your equipment stays in good working condition. Keeping your commercial laundry machines well maintained will help prevent them from breaking during a busy day, reducing downtime. You’ll also have peace of mind knowing that if something does go wrong, the issue will be sorted by the leasing company. It can be quickly addressed without you having to spend more money on repairs.

Financial Considerations

Laundromat equipment leasing is where you pay for equipment at a set price on a monthly basis, so you can better manage your finances over a period of time. If you choose to buy a machine outright, then you don’t have to worry about staying on top of payments. However, you could be left with higher long-term costs due to regular maintenance and the need to replace your machines after a few years of owning them.

Tax Benefits

Leasing payments are often fully deductible as a business expense which will reduce your taxable income. This immediate deduction of lease payments can be seen as a more significant short term tax advantage. When you buy commercial equipment to own from the start, you’ll only be able to deduct depreciation while the machine is in working condition. This will mean that your tax benefits are spread out over several years.

Lease Agreements

To help you make an informed decision on the type of the lease that you go for, it’s important to understand the main two agreements. One option is an operating lease, which are typically short-term and do not transfer ownership to the lessee. This means that you do not own the equipment. These types of leases will often include coverage for maintenance, making them ideal for laundromats that operate multiple machines every day. 

The second option is a capital lease. These are more long-term and will often result in you taking ownership of the equipment once the lease period is finished. This type of plan is suited more for business owners who are planning to keep and retain the machines for a long period of time.

Financial Institutions or Leasing Companies

If you are looking for a leasing agreement that is more tailored to your business, then partnering with a financial institution or leasing company may be the right choice for you. Think about the reasons why you are looking for a lease. Are you looking for a specific type of commercial grade washer or dryer? How much money can you spend for a down payment? How will this lease benefit your business? Research online and compare different providers to gather information such as lease terms, interest rates and the ability to upgrade your equipment. 

Once you’ve found a lease agreement that works for you, you’ll need to complete an application to register your interest. During this process, you’ll need to provide different documentation to prove that you can meet the lease payments. This may involve financial statements to check credit scores, a business plan to demonstrate the overall goal for your laundromat, and any other relevant information.

The Laundromat Equipment Leasing Process

Key Terms and Conditions

As with most agreements and contracts, there will always be a section for terms and conditions. These are designed to cover all sides of the lease agreement covering factors such as lease duration, the payment schedule and any other associated fees. You may also find policies on what to expect if payments are missed, or if you have experienced problems with the equipment that you are renting out. It’s important to read the terms from start to finish before you sign the lease, as this will finalise your financial commitments.

Renewal and Buyout Options

When your lease comes to an end, you will be given the option to either renew the agreement for an additional set of time, or pay for the equipment outright so it is under your ownership. If you choose to buy the equipment, the remaining cost will often be reduced as the equipment has now been in use for some time and may not be in as good condition as it was before. Review these options and decide what works best for you. Choosing to return your equipment at the end will give you the opportunity to lease a more up to date machine.

Managing Your Leased Equipment

While the equipment is under your supervision, it’s important to make sure that the machines stay in good working condition. If the contract you’ve signed includes service plans and cover for maintenance, then this is a great benefit that you can use to help keep track of the health of your machine. It’s just like leasing a car, when you book services on a regular basis, it’ll help extend the lifespan of your machines and also keep them in good condition. However, it’s good to keep in mind that equipment breakdowns can still occur, so make sure you have a plan in place so that you can still efficiently serve your customers. Responding to downtimes quickly will help you avoid any costly disruptions. 

One other way to avoid damage to your machines is making sure that your employees have been properly trained so they know how to handle and operate the equipment correctly. If a customer needs help using a washer or dryer, you know your staff will have all the knowledge they need. It also means that your staff can identify and fix any issues before they become a problem, helping your machines to last longer. 

When you are opening a laundromat, the most important part of your business is the equipment. Without any washers and dryers, you have no laundry service! Getting hold of the right machines can be a costly process, which is why equipment leasing offers a more budget friendly approach. Having the ability to split costs across a certain period of time helps alleviate the financial pressures, allowing you to better manage your outgoings. In this blog, we’ve highlighted exactly what laundromat equipment leasing is, the benefits and considerations to keep in mind when you are signing up for a new agreement.

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