Equipment Financing and Leasing
Equipment represents the largest single asset category in most laundromat acquisitions, typically accounting for 40–60% of the total purchase price. While SBA loans and conventional financing can cover equipment as part of a broader acquisition package, equipment-specific financing offers an alternative path—particularly for buyers funding a retool of an existing store, purchasing additional machines to expand capacity, or structuring a deal where the equipment and business are financed separately.
Equipment loans vs. equipment leases
Equipment financing comes in two primary forms: loans and leases. The distinction matters for cash flow, tax treatment, and long-term ownership.
Equipment loans function like any secured loan—the lender provides capital to purchase the equipment, the equipment serves as collateral, and the buyer makes fixed monthly payments over a defined term. At the end of the loan, the buyer owns the equipment free and clear. Equipment loans typically carry terms of 5–7 years, interest rates of 6–12% depending on the buyer's credit and the lender's assessment of risk, and require a down payment of 10–20%.
The primary advantage of equipment loans is ownership. The buyer builds equity in the machines with every payment, can claim depreciation deductions (including Section 179 and bonus depreciation), and has no obligation beyond the final payment. The equipment becomes an unencumbered asset that can be sold, upgraded, or used as collateral for future financing.
Equipment leases provide the use of equipment without ownership. The lessee (buyer/operator) makes monthly payments for a defined period, after which they may return the equipment, purchase it at fair market value, or extend the lease. Operating leases keep the equipment off the balance sheet and provide lower monthly payments than a loan, but the lessee does not build equity and cannot claim ownership-based tax deductions.
Capital leases (also called finance leases) are structured so that ownership effectively transfers to the lessee by the end of the term—usually through a $1 buyout option. For tax and accounting purposes, capital leases are treated similarly to purchases, allowing depreciation deductions while spreading the cost over the lease term.
Specialty lenders
The laundromat industry has a handful of specialty lenders who focus exclusively on commercial laundry equipment financing. These lenders understand the industry's economics, equipment lifecycle, and revenue characteristics in ways that general-purpose lenders do not.
Eastern Funding is the most prominent specialty lender in the space, offering equipment financing, acquisition loans, and working capital for laundromat operators. They have financed thousands of laundromat transactions and their underwriting criteria are calibrated specifically for the industry. Other specialty lenders include manufacturer-affiliated financing programs (Speed Queen Financial Services, Dexter Financial) that offer competitive terms specifically for their equipment lines.
The advantage of specialty lenders is speed, expertise, and flexibility. They can often approve and fund equipment loans in 2–3 weeks—significantly faster than an SBA process. The trade-off is that their interest rates may be higher than SBA rates, reflecting the speed and reduced documentation requirements.
Manufacturer financing programs
Most major equipment manufacturers offer financing programs through affiliated or partner lenders. These programs often include promotional terms—reduced interest rates, deferred payments, or extended terms—designed to incentivize buyers to purchase their equipment brand.
Speed Queen, Dexter, and Continental Girbau all offer financing programs with typical terms of 5–7 year terms, competitive rates (sometimes below market for promotional periods), flexible down payment requirements, and bundled installation and service agreements. Manufacturer financing is particularly attractive for retools, where the buyer is purchasing a full complement of new machines from a single brand. The manufacturer has a strong incentive to facilitate the sale, and the promotional financing terms can save thousands in interest over the loan term.
The limitation of manufacturer financing is brand lock-in. Financing through Speed Queen's program typically requires purchasing Speed Queen equipment. If the buyer's preferred machine mix includes multiple brands, manufacturer financing may not accommodate the full order.
Financing a retool
Retooling—replacing some or all of the machines in an existing store—is the most common use case for standalone equipment financing. A full retool of a 40-machine store costs $160,000–$400,000, and most owners cannot fund this from operating cash flow alone.
The retool financing decision involves several considerations. Timing: can the store's current equipment sustain another 2–3 years of service while the owner builds capital, or is the retool urgent? Scope: is a full retool necessary, or can a partial retool (replacing the oldest machines while keeping newer ones) achieve most of the benefit at lower cost? Financing source: should the retool be funded through an equipment loan, a line of credit, manufacturer financing, or a combination?
The revenue impact of a retool is the key variable. Modern equipment typically generates 15–30% more revenue per machine than aging equipment—through higher vend prices (justified by better performance), increased utilization (faster cycles, more reliable operation), and digital payment premiums ($49 average digital transaction vs. $31 cash). A well-planned retool often pays for itself within 3–5 years through increased revenue and reduced utility and maintenance costs.
Equipment financing and the acquisition
In an acquisition context, equipment financing can be layered into the deal structure in several ways. The equipment can be financed separately from the business (equipment loan for machines, seller financing or conventional loan for goodwill and other assets), the equipment can be included in an SBA loan that covers the full acquisition, or the buyer can assume the seller's existing equipment lease or loan (if the terms are favorable and the lender permits assumption).
Separating equipment financing from the broader acquisition can sometimes improve the overall deal structure—particularly if manufacturer financing offers promotional terms that beat the SBA rate on the equipment portion. However, this complexity requires careful coordination between lenders and should be structured with input from the buyer's CPA to optimize the tax treatment of each financing component.
Sources & Further Reading
- Eastern Funding — Equipment financing programs for laundromat operators
- Speed Queen — Financial services and equipment financing options
- Dexter Laundry — Financing programs for commercial laundry equipment
- Coin Laundry Association — Equipment financing resources
- IRS — Section 179 and depreciation guidelines for commercial equipment