hey what’s up guys it’s jordan with the laundromat resource podcast this is show 93 and i am pumped that you are here
today for a variety of reasons first of all we have joining us chris money chris maholick uh from prime capitals his second time back on the show and we you know there’s a lot going on in the world today there’s a lot going on in the financial realm in the lending world right now and chris comes on and we talk through a bunch of different topics uh when it comes to laundromat financing and we hit we had a bunch of stuff but what i love even more about this episode is even though this thing is just chock full of information for anybody interested at all in financing on any level uh laundromat stuff chris and i have decided to join forces with our powers combined uh when we’re going to do a webinar april 28 2022 april 28 2022 so if you’re listening to this episode before that you’re going to want to join this if uh if you’re interested in financing for your business at all because what we’re going to do is it’s not really going to be a webinar style like we do every single week here we’re doing a live q and a style and it’s anything financing related if you have specific financing questions about specific deals you can bring those if you have general questions bring those if you’re brand new trying to figure out how to finance your first laundromat bring those questions if you’re a current owner looking to maybe re-tool bring those questions if you’re a current owner and you’re trying to expand your empire bring your q financing questions about that if you’re trying to you know i don’t know refinance your laundromat or you want to bundle a bunch of your loans your business loans into one loan bring your questions about that and chris has said he says it’s on the podcast later spoiler alert uh that he will just stay on this and i will too this live q a to answer all of your questions both specific and general uh as long as it takes and so he’s like if we stay on two three hours i’m in and i’m like okay like i’ll i’ll nestle in and we’ll just get it done but i’m super excited about that in saying that he’s willing to do that and so man if you again at all are either in the process of looking into financing or are going to be in the process or you might be in the process man come and bring your questions you know i would say come and just listen in which you obviously can do but man this is a golden opportunity to get your questions answered from somebody who knows this business and who knows financing so again that’s april 28th 2022 if you’re catching this before that go sign up at laundromat resource.com events the link to that and everything else that we talk about in this whole episode will be on the show notes or if you’re on youtube down below and you can find those show notes at laundromat resource dot com show 93 and again the sign up for that specific webinar and all of our webinars that we have every single week excuse me uh lottermyresource.com events okay so make sure you join us and i think it’s gonna be awesome if there’s you know hundreds of us there all asking questions we’re all gonna benefit more so uh super super duper excited about that okay so real quick i wanna say a big welcome to all the new members uh over at the laundromat resource community both the free community and the pro community over there and after last week’s episode if you missed it i we were celebrating some of the milestones over here at laundromat resource that we all uh created together which is very cool um and and with that announced that there are some partnerships beginning to form with laundromat resource community that’s us and uh and other industry uh service providers and other industry product providers um and and all that tells me is hey our community is uh you know it’s we’ve got that critical mass where you know people are taking notice and they want to help us they want to help you achieve your financial goals and and a lot of our resource we want to help facilitate those relationships to get you in contact with the best people in this industry to help you achieve your financial goals faster and in order to do that a lot of these guys are throwing in perks to the pro community members and uh you know judging by the number of you that signed up over the last week which by the way thank you very much and hopefully you’re going to get i’m i’m pretty confident you’re going to get at least 10 times your investment there but man uh what that tells me uh just by the sheer number of people who who joined the pro community over there is that these partnerships are are something that’s valuable to you so we are actively uh working on building more of those relationships to bring you more pro perks over there so you’re interested in checking that out on my resource.com pro okay enough of that and uh the last thing i want to leave you with before we jump into with chris money to talk financing is the fast lane tip for helping you achieve your financial goals faster utilizing laundromat resource is did you know that both the free community and the pro community have access to a value add checklist right and what uh what this is is not a it’s not a an extensive list of every possible idea of ways that you can add value but you hear that thrown around a lot if you’ve been around the podcast maybe you’ve heard dave london about millionaire mints talk about adding value well this what we’ve been doing is compiling a list of ways that people do this is again not an extensive uh list however it’s chock full of really great ideas of ways that you can add value to your community at your laundromat to your clients to your customers and there’s gonna be some good ideas that maybe you can implement in there but also it’s just gonna help you get the creative juices flowing and help you thinking of more ways to add value to laundromat which ultimately will serve your community better and also serve your your business and your bottom line uh and that’s what we’re about here utilizing laundromats to yes to serve communities and to make these communities uh better and to give them the experience that they deserve and also to help you achieve your financial goals through a lot of man ownership so go down that download that value add checklist over there uh and man get going add value to your customers okay enough of all of that uh super exciting stuff going on but i want to jump into it with chris again come join us april 28 uh 2022. if you’re listening to this after the fact first of all i’m sure you know it was a great webinar and a lot of great stuff happening over there a lot of great questions asked and answered sorry we missed you but you can get access to that webinar and every other webinar that we do again we do a weekly live free webinar every single week the pro community has access to those replays so uh if you’re interested in that uh you know getting the replay of that or any other one you know go check that out laundermatress.com pro okay let’s jump in with chris money and talk financing see you on the back side chris money welcome back on the show how are you doing man awesome how are you jordan ah i’m doing excellent now i mean having you back on the show i got to tell you uh that your your interview your previous interview i mean that was like way back in show 24. so if you haven’t if you haven’t checked out his uh first interview that’s a lot of my resource dot com show 24 is one of the most popular podcast episodes and on my youtube channel our like hour plus long episode actually it was that was it was an hour and a half plus long episode is my number eight video on my youtube uh which is pretty crazy man which kudos to you for getting such good information even youtube recognizes your genius so oh get out of here if you’re a genius you’re the you’re the one not me uh well hey i’m super excited about this i know we got a lot of stuff that we want to talk about stuff is crazy right now man like there’s so much uncertainty interest rates are doing all kinds of weird things you know that so many of us don’t understand what’s happening why stuff’s happening uh you know there’s just there’s a whole lot of stuff that i know that we want to get through to kind of help people understand you know how do you finance a business like a laundromat and what does that look like and uh but before we kind of jump into it uh i just want to mention i think i mentioned this in the intro but i just want to mention that we’re going to talk about a lot of stuff today chris and i and we’re gonna we’re gonna cover a lot of ground so make sure you’re taking notes but also we recognize that we’re not gonna be able to hit everything in this episode and we also recognize that a lot of uh you know individual situations things can vary a little bit and and more particular questions come up so chris and i are going to jump on in about a week we’re going to jump on check out uh london resource.com events or check out the show notes uh for the date of this um and i probably mentioned it in the intro but we’re going to jump on a live q a slash webinar type thing it’s mostly going to be q a where you can get your questions answered from i was going to say chris and i but mostly just from chris i’m just there for the eye candy mostly so uh so make sure you join us for that it’s free it’s live and your questions will get answered all right yeah yeah and jordan absolutely i mean we talked about this obviously before this particular episode and and everybody has a totally different situation right so bring the nuances bring the questions that you want to ask and every situation is completely different and we’re going to do it we’ll do it something totally different let’s do it yeah totally different but but super good so uh so join us for that even if you don’t have questions you just kind of kind of want to listen in uh come join us for that it’s free i mean yeah and jordan this is for this is for folks that are going to be brand new into the industry this is for folks that have been in the industry a long time and have questions about existing loans they may have store opportunities they may have passed on over the years they wish they had gotten from a financial aspect let’s talk about ages of equipment and financing term links everything let’s just open it up love it dude what a what a guy man what a guy well speaking of opening up let’s open this thing up and let’s talk about rapes man i mean they’re going wild right now i mean we’re seeing it all over the place right it’s not just with our business or equipment loans we’re seeing it in the housing market we’re seeing it all over the place what’s going on with rates and what do we need to know about what’s going on with rates so as it relates to laundromats and acquisitions i get the questions all the time of hey you know i can go here and i can get a quarter percent less or i can get a quarter percent higher here and hey i don’t know if this is a good rate i don’t know the reality is is when we’re evaluating laundromats i just want to start out there we are going to be absolutely competitive on rates and other lenders are competitive on rates in this particular industry as well because if we charge too much and if we don’t make sure the launch of that cash flows you don’t pay and if you don’t pay that’s a problem for all of us right so rates right now what you’re gonna see in the lending world the fed funds rate is the bank rate that banks lend to each other okay and that rate is going up as it relates to us as consumers in the business world okay that are thinking about getting into a particular business venture a lot of things follow what’s referred to as the wall street journal prime rates okay now that is actually determined by the banks not by the feds that rate has not increased yet that rate will increase so a lot of loans that are given by banks right now because of the uncertainty in the world the global you know the global economy ultimately that uncertainty is driving up rates now trying to fix rates for extended periods of time right now is challenging because of that uncertainty so a lot of banks a lot of lenders are going to try to go in and get you a variable rate loan okay it’s common you’re going to see a lot more of this one thing that i do suggest to consumers that are thinking about getting a new laundromat that are already in the laundromat business and have variable rate loans trying to fix a loan for a particular term whether it’s a couple of years on a refinancing whether it’s getting into the business and at least trying to fix the rate for a couple of years is definitely suggested coming out of the gate at a variable rate term because of all the uncertainty heck rates could go up 100 basis points 200 basis points and what that means when i say 100 basis points that essentially means 1 so say from six percent to seven percent seven percent to eight percent now we’re working with a lot of customers right now we’ve prepped them we’ve said look the reality is there’s so much uncertainty we’d love to close your loan in the next 60 days next 90 days next 30 days but rates could go up one percentage point now the good news is is that one percentage point two percentage points in the laundromat industry acquiring a new location refinancing it’s not gonna break the bank okay us as consumers we’re used to oh one percent two percent three percent loans you know because we go into the housing market we’ve maybe gotten a mortgage and these rates are traditionally lower right uh rates in the in the uh commercial space are traditionally higher especially when you’re locking rates in um but if you’re gonna go up one percent two percent uh again we’ve prepped folks all you folks that are listening right now yes your payment is gonna go up but the questions when you’re getting into the laundromat business in our opinion shouldn’t necessarily be hey you know uh this is gonna cut into my profitability yes it is we understand that but it’s really is it a good is does it make good business sense to do the loan into the to acquire the location even if the rate is going to be a little bit higher because of this uncertainty and obviously we work with you other lenders work with you uh it’s not going to break the bank you’re still going to cash flow if you’re going to be doing business with us but rates they’re going to they’re going to continue to go up for the foreseeable future right now the uncertainty is what is driving that and the amount of money that went into the economy is driving that as well there was a lot of free money that was out there so it’s going to be uncertain for a while um but again us that are in this business or thinking about getting in this business no cause for concern so i mean with kind of the uncertainty of the rates and stuff i mean what what does that mean for somebody maybe who’s trying to get into their first laundromat or trying to get their next laundromat i mean is now a time to a good time to do that still or should we be waiting for things to calm down is the uncertainty something that we should be i mean obviously you said that you’re you’re not concerned about it uh but i i mean i feel like i’ve talked to people who are concerned because they’re just not as comfortable with the uncertainty so i mean what advice do you have for you know somebody who’s maybe looking to go you know buy the a new business either for the first time or multiple time don’t focus on rates okay that’s the big thing because the rate is going to be what the rate is going to be when you’re getting into this business the best advice i can give is try to lock in a rate with whatever lender you’re working with for at least a period of time and that period of time is maybe the first three years of the loan maybe the first five years of the loan heck it could be even a five-year loan lock it in for the full five years okay but trying to get rate locks for terms past five years right now is certainly challenging but do not focus and try to get that rate lock and for seven years for 10 years it’s just not gonna happen right now especially for newer owners it’s challenging we’re still rate locking for seven years on retools but the challenge is is that it’s getting tougher and tougher to do that at super low rates i mean i can give you an example right now uh our rates have gone up almost 100 basis points which is one percent literally over the last 60 to 70 days yeah so it’s it’s tight out there but again if that one percent difference is gonna cause you to possibly not get into the business venture you’re thinking incorrectly in our opinion about it do not let it sway you away from getting into the business rates are still extremely low to traditionally where they’ve been in the past even if they continue to rise over the next one to two years right um it’s still going to make sense for you to get into this business because we’re going to make sure and other lenders in this business too make sure that you’re going to cash flow well on these good laundromats that you’re getting into yeah keep writing down all these like great quotes that you’re that you’re spewing right now i just think about it from a standpoint of a consumer right jordan i mean all of us look at our mortgages for example and we say my gosh i had such a a low mortgage or maybe i had a lower market or maybe some folks have a higher mortgage whatever it might be rates seriously like getting into this business the rate i mean i could run amortizations for folks and that may be a good question that we do you know for our question and answer session hey give me an example hundred thousand dollar loan what is the payment difference for a hundred thousand dollar loan for example on six percent and seven percent and actually give some figures for folks to consider because it’s not going to be something that’s going to be drastic where it’s going to cause the laundromat not to cash flow yeah yeah i i like that answer and i like uh i like one of the quotes i wrote down i was like frantically writing is you said you know if one percent rate increase is going to dissuade you from getting into the business you’re not thinking about it the right way and i think i mean you know ultimately it’s a math problem right like it’s a math equation and we’re going to take a look at what the numbers are telling you what story the numbers are telling you and you know and then decide does that still make sense or not and it doesn’t matter if you’re paying a 20 you know interest rate if the math tells you you’re still going to be making the return that you feel like you need to make in order to make it worth it for you so totally agree jordan and one other thing to interject along those lines too is that there was a lot of money a lot of free money i shouldn’t say free money it was used to help you know businesses you know carry themselves through during the challenging you know pandemic right but because of that there were many folks that didn’t borrow right and now they’re looking to borrow well from a banking standpoint folks like us you know that affected us because what happens when folks all of a sudden have all this money in their pocket they’re going to pay cash so they’re writing less loans so for our committee ultimately looking at us saying hey we need more let’s go let’s go let’s go so we’re not the only ones that are like that most lenders that are in any business and even the laundromat business they’re like that so they’re wanting to write loans and because of that they’re going to be as competitive as possible because they want the business they need the business they’ve got numbers all right so understand the rates that you’re getting that are out there are going to be you know i don’t want to say the best but they’re going to be competitive for what the market dictates are there any factors that for example that i can control uh to determine whether or not i will be able to get a fixed rate loan of some sort is there anything that i can be doing to make that more or less likely uh to happen that is a great question from a standpoint of a brand new individual getting into the business what we typically do is we rate lock for up to five years for individuals that are getting in it doesn’t matter if your net worth is ten million dollars or one hundred thousand dollars that’s where we are because our evaluation of a financial transaction the laundromat business is not only predicated on personal credit personal net worth a lot of it is on the laundromat itself but yes it’s in our best interest if you’re getting into the business to rate lock you for a period of time absolutely now on a retool scenario or refinancing scenario absolutely we want to rate lock you right and like i said going out to seven years is still doable but obviously like last 60 70 days that has gone up you know in a lot of these loan documents for folks that are out there right now with variable rate loans take a look at your loan documents and see what it follows it most likely will follow uh wall street journal prime rate and consider a refinancing at this point even if the rate’s going to be slightly higher than your variable rate right now given the uncertainty only because if you rate lock in on your refinancing for say another five years or another seven years that’ll give you some time especially during this you know roller coaster ride we’re in right now yeah okay so i mean that brings up a good question because i get asked this a lot in my consulting calls and my coaching calls is what about refinancing what is it possible to refinance i mean you’ve obviously mentioned it so but is it possible to refinance a laundromat loan what does that look like uh yeah talk talk to me about refinancing it is it’s possible to refinance a laundromat an existing laundromat loan okay so i’ll give you an example of some a lot of the transactions that we work on say a customer goes out they purchase a laundromat okay as part of that laundromat acquisition they retool right and as part of the retool it’s going to be a variable rate loan so acquisition and brand new equipment all right say it’s a seven year term that that happens all right we’re one year into that seven years we would refinance that absolutely for six for six years okay what we can’t do is we can’t refinance for an extended term past the original term or what the what the loan is so if you had an original term of seven years and you came to us after two years and said hey we’d like to refinance uh we can only refinance for five years we couldn’t go out an additional seven years okay so it’s predicated on the initial note but absolutely the the refinancing process really has to do too with the fact of how much equity the location is is valued at right because if you’ve paid down your note and you’re looking to do a refinancing scenario we definitely want to make sure that we have some level of equity in the laundromat in doing so at least we’re going to want in a refinancing scenario we’re at least going to want a 35 equity position in the location financing 65 so we’ll help you calculate that we’ll work with you on your existing profit and loss statements we’ll look at any existing debt that you have and also there may be folks out there as well that have multiple locations um something that i know we’re going to talk about later in the show here is all asset liens and cross-collateralization we’ll dive into that a little bit but there’s ways to refinance notes uh existing notes absolutely they should be looking at it right now they should be studying the wall street journal prime rate um you know that’s on their existing variable rate loans right now again that’s the banks that control that rate that has not gone anywhere yet that all of a sudden is going to jump okay so when that happens that’s when folks maybe say wow i really need to start refinancing but look into your options right now start talking to folks about this we’re going to have a q a bring a specific scenario up uh throw some numbers out at us and and let us take a peek is the uh is the presence of a a variable rate loan is that is that the main indicator that i should be looking into potentially refinancing or is there anything else are there any other triggers that should tell me hey it’s probably a good time to look at refinancing right now that’s a great question that is such a great question absolutely that’s thank you that’s that’s what it’s all about and it’s all about from from a consumer standpoint we obviously want the lowest rate possible okay but as soon as that variable rate loan starts going up it’s kind of like the same in the mortgage world where you had the year arms and seven year arms right the variable rate loans ultimately or you locked them in for five years well what do you do before that five year arm expires you’ve got to refinance right so that’s your trigger point there but the trigger point in this particular scenario is yes absolutely if you’re in a variable rate loan scenario that follows and i’m guessing a lot of these variable rate loan scenarios are going to follow wall street journal prime take a look at what the prime rate is you know watch it it will go up but that that’s what should precipitate a refinancing yeah that’s primary driver jordan yeah and i would also probably just throw in like and maybe you mentioned this i was taking some notes but uh balloon payment if you got a balloon payment coming up uh i don’t know if you mentioned that or not but that’s another potential scenario i would say absolutely it is um another scenario too is that we’re seeing in a lot of these uh seller financing scenarios and acquisitions where there’s a period of time that the acquiring buyer has to ultimately get out of the seller’s note so that coupled with you know a variable rate loan that those are trigger points too and if something says hey you should be looking at getting to a third party financing company after five years and you’re in year two for example start now do it now get locked into a rate that’s another trigger point excellent excellent point on that jordan yeah yeah okay well you mentioned you know these loans are not just you’re not just throwing money at people for nothing and just you know trusting that that money’s gonna be paid back i know that you specifically every lender but you specifically do a really good job of you know vetting locations and all that stuff but ultimately those loans are backed by you know by assets right and so can you i mean let’s talk about you mentioned all asset loans and cross-collateral collateralization uh i do the same thing what tell this you know the problem is that i’m a slow talker and i try to talk really fast and i just i can’t do it so uh talk to me what what are these things what what do we need to know about them and what does it even mean okay so excellent point i’m glad we brought this up so in any scenario when an individual is going to acquire a laundromat whether it’s through us whether it’s through the small business administration the sba local banker using an sba type loan there’s what’s called an all asset lien filed against the actual business entity in the location okay and what that means is that’s the security interest that us providing the money has in a particular location right so if if an individual is going to go ahead then after we provide the initial funds for a location if they’re going to go ahead and have additional equipment put into that particular location they’re going to need what’s called a subordination from us meaning that if you’re going to put in say a card system into that location right you’ve you put equipment in uh you know acquisition scenario it’s a business acquisition coupled with equipment which is more or less an asset purchase agreement but if you’re going to add equipment into that location we already have an all asset lien what we’re going what you’re going to need if you’re going to put more in is you’re going to need to have a subordination agreement through us that so we say hey it’s okay those assets are not ours okay and this is the case in nearly all scenarios for all laundromat owners when they do any level of financing there’s gonna be especially in a a brand new brand new store a store that somebody’s acquiring uh say somebody paid cash for the store okay and they retool the store what they may not know is the lender that they use is actually filing an all asset lien against the store and not a particular filing on just the assets that are brand new going into that location so i think it’s really important for owners to uh look into that a little bit further and find out where all asset liens may be a hinderance and i’ll tell you why this is really important is that if i pay cash for a location okay and then i go out and i finance a hundred thousand dollars in equipment and i put that equipment in my store and i go ahead and i say huh i’m thinking about you know doing something else and i’m gonna you know borrow some funds from somebody else and lo and behold they run a lien search and they see that there’s an all asset lien it’s not just on the new equipment that we put in but it’s on everything that’s a big no-no okay that’s a big challenging situation but lenders do it and sometimes the folks that are filing the uccs can make mistakes so it’s really important to understand the security interest that lenders have in your locations okay now i can tell you right now i know uh you know in general you’re going to see all asset liens are very common in the laundromat industry so don’t be surprised if you uncover that that is the case um another thing as well that’s really important is if you jordan if you have one store and you’re looking to acquire another store you may be presented with the opportunity of cross-collateralization okay or a corporate guarantee of the existing entity and what that means is that in nearly well we suggest always if you’re going to go ahead and acquire a laundromat you should put it under an llc for example call it abc company right if you’re going to acquire another location you definitely want to file another llc called cde company whatever it might be okay and in that particular case if you already have abc and you want to get cde cde would be used to guarantee our abc would be used to guarantee the acquisition of cde okay and when you cross-collateralize typically you’re doing so because you don’t want to put as much money down on the second location okay so what you can use is equity that you’ve built up from your original location in abc entity and use that as a partial down payment for the cde equity uh entity okay when you do that you’re causing yourself a potential challenge someday if you want to sell the abc entity because there’s going to be an all asset lien first of all and a cross-collateralization with that second location so at all costs understand your options that if you are going to acquire a second location is it worth it to cross-collateralize your assets with an entity where you may have very little debt in that first abc entity you could have fifty thousand dollars in debt and you could have five hundred thousand dollars in equity okay that you’ve built up when you cross collateralize you’re not just cross collateralizing for say if you need an additional hundred thousand dollars you’re cross collateralizing using an all asset lien for that entire entity so if you go to sell that entity someday and you may say oh i’m just gonna pay off that original fifty thousand dollars in debt for that abc entity it doesn’t work that way it’s paying off both loans okay so this is something i welcome folks coming in to the q a session give us some examples about specific opportunities because this is really important especially for folks that have multiple locations or they have one location and they’re looking to get into two that’s when these questions really come up jordan or for folks that have five six seven eight locations and they want to sell one right all of a sudden whoa i didn’t realize cross-collateralization meant i’m basically blending everything together okay so this is really important for owners to understand and just educate yourself on how all of this works yeah that i mean that is a huge huge point because i mean the implications are really big right especially when you get into the multi-store ownership and you know you’re you’re starting to move some pieces around you know because there’s there’s scenarios where you get you know you get multiple locations and and you decide you want to you know sell off a lower performing one or something like that well if you’re not understanding the situation that you’re walking yourself into that could be a big that could be a big deal trying to do that uh when you know if if your your loan documents are saying hey no like that’s not how it works you know everything’s cross-collateralized and depends on each other basically yeah and what’s on it what also is additionally important to understand as well too is that if you’re going to be borrowing money outside of your primary lender you know for a particular location check your loan documentation it may actually state that you’ve got to notify your additional you know your primary lender if you’re going to be borrowing funds you know over a set dollar amount and these are not bad things it’s just understanding exactly what the scenario is from a growth standpoint because you may not want to you know for example you may not want to cross-collateralize and you may want to think of other options as you grow that will help avoid potential situations like that down the road and it’s really understand it’s really important to say say folks are out there and they have routes okay and they want to take you know single load machines and put them in apartment buildings for example and it’s a little bit off topic here um but if they do that and they finance it all asset lien already filed okay so now all of a sudden i’ve got these machines out there i want to refinance these machines that have already been at variable rates but you’ve got an all asset lean on your entity and you’ve got other debt elsewhere as well there’s a lot of scenarios i welcome folks for the q a to talk all asset talk cross-collateralization it could be of great benefit the cross-collateralization there’s no doubt no doubt about it but it can prohibit you once you get to that critical mass of say you know real multi-store ownership it could be challenging if you have other plans yeah and i mean i think i think the point is it’s a tool right and you want to use the right tool for the right job and that’s a very individualized thing right great great opportunity to bring that to the q a right because it depends on what you’re trying to do you know with your with your portfolio of laundromats whether you want to cross-collateralize or not now quick question on that same topic is uh i mean is the main benefit of cross collateralization uh is it you know a lower down payment or a no down payment um so you know let’s say i want to take out another loan on equipment on my third store but i don’t want to cross collateralize it because i’m planning on selling off my other my first one or my other two or whatever you know is it just a matter of how much i’m putting down up front or are there other factors that go into that another great question by jordan barry i mean you are on fire today you are on fire i mean it’s almost embarrassing right now what you’re saying so well well here’s here’s the laundromat dream owner okay they get into the business they acquire a location they retool okay they retool it they’ve increased revenue it’s rocking and rolling it’s humble okay i’ve now built up equity in this location and i say you know what i put so much work into this location i ought to be able to get myself a second location right okay us as lenders come on we want 30 down on these locations right just from a security standpoint we want to securitize ourselves right so a loan to value just a you know a nice loan of value okay guess what let’s take a look at your first location that you bought for this that you put this much equipment into now it’s worth this oh you want to use some of that equity now you don’t have to put 30 percent down you put 10 down ultimately and then we utilize you know the equity that you’ve used you have in that other location ultimately as a down payment okay so they don’t have to put it down so a lot of these scenarios really have to do with accelerated growth okay they want to use money from equity pull equity out ultimately to use it to acquire additional locations and that’s really primarily where a lot of these requests come from yeah yeah which i mean i think is is great i mean it’s a great growth tool right i mean i think that’s real estate investors business owners you know debt and equity are your your biggest tools right and moving equity from one location to another which is basically what you’re doing it’s not you’re not losing that equity by cross-collateralizing you’re you’re shifting it over to the second location right and so i’m that’s you know that’s a great growth tool and like i said it’s a tool right and so but don’t use a hammer where you need a saw so if you don’t need you know if you don’t need the cross collateralization because you have the down payment or whatever the case may be you know maybe it’s better not to use it or if you’re looking to really accelerate your growth you want to get five locations asap hey man that might be the way to go so what we suggest absolutely um it may be the way to go but what we suggest with individuals that really have a have a winner first location okay go into a second location bring a business partner in even if they’re an equity contributor bring a business partner and keep them separate entirely separate um because that that kind of avoids that cross-collateralization mess down the road and if you’ve built that much equity into it think about it like this i mean you may have very little debt on that first location again that’s what’s to consider right um you know and all of a sudden that all of us at lean is not going anywhere until both of those are paid off okay both of those locations so uh uh bring a business partner in for your second third you know fourth fifth locations you know or at least consider it yeah uh awesome awesome uh and and you know i i don’t want anybody to be listening to this and getting confused or overwhelmed or anything like that that is you know this is this is meant to be sort of a primer to discussion right and the discussion may be at the q a um or it may be you reach out to chris and say hey you know i kind of got to just a little bit of you know an all asset lien or cross collateralization but help me help me work it out in my situation right this is a primer to a discussion absolutely that’s what this is all about absolutely because and again between now and when we have this next session jordan i suggest to everybody get your loan documentation out take a look at it bring the questions i may not have all the answers but i’m going to do my darndest to try to help right because that’s what we’re here for trying to help yeah let’s be honest you have all the answers let’s just be honest right here uh i love the humility that you got going on it’s great it’s great very modest uh all right let’s talk uh cash flow statements how about talk to us about cash flow statements the importance of them what we need to know about cash flow statements okay so another great topic jordan how do you you are on fire today you really are so i mean maybe you fed me that one i don’t know so for us you know cash flow statements obviously in in uh you know acquiring locations and brand new locations but more or less for acquiring locations right from from our standpoint and from a lending standpoint i don’t want to speak for other lenders that exist out there okay but from our standpoint i’m most focused on the laundromats ability to generate money based on what us is entrepreneurs put into the location okay i’m not concerned if there’s a rented out space in the location for a cellular phone place okay or if there’s a market that’s paying x number of dollars per month inside of the laundromat location don’t care uh if there are um gaming machines in time inside of the location which that’s a big challenge for us to try to get over that’s you know and we’ve seen this too where there’s gaming machines for us that’s a challenging situation that’s a liability uh i i strongly suggest not relying on gaming machines and locations okay yeah i i have clients i have a client right now who’s looking to buy a laundromat and the laundromat is basically uh just there to float the bills for the gaming machine and the legality of this particular gaming machine is also in question and so yeah it’s it’s a tricky situation it’s tough so it is it is but it’s lucrative as us as entrepreneurs wanting to get into the business we’re like wow look at this there’s all this other extra income okay or for example say you know i close at 10 pm every evening the laundromat closes right now which by the way that’s a big growth opportunity in in laundromats if it’s if it’s closing at 10 and open up the next day at eight that’s that’s that’s we love that okay maybe go 24 hours there who knows but if there’s income coming in in that particular location and they’re closing because they’re renting out space for a pickup and delivery processor in the middle of the night for me that’s not long term okay that’s not long-term longevity here so from a pure cash flow statement i’m really looking at the vend the wash dry fold and pick up and delivery that the entrepreneur can generate on their own okay i’m not looking at all of these other scenarios right another important aspect when you’re evaluating these laundromats and you’re putting together your individual cash flow statements which by the way we have a template for this other lenders have templates for this as well so you can reach out to us we’ll get you a template very simple temple okay um but we also like to look at how old the equipment is in a particular location right if the equipment’s fringing on that 7 8 9 10 year old range we’re thinking to ourselves my you’re going to have some debt servicing here for brand new equipment coming up soon so as lucrative as it is for us as entrepreneurs to get into the business you know sometimes i think to myself well maybe the store’s for sale right now because the current owner really didn’t want to retool their location because they know what it’s going to cost and it’s going to crush their cash flow okay so the debt servicing for new equipment is extremely important from a cash flow statement when you’re getting into a new location okay and couple that with all of these value ads that are potentially advertised on these stores that are for sale right now we really want to get to the bottom of what can the laundromat really generate based on you the entrepreneur what you can generate and what you can increase the vend on with new equipment not these other value ads and we don’t rely on and i’ve had some certain scenarios where folks have said well we’ve got a contract with people that are coming in for pickup and delivery services and they’re using the machines in the middle of the night and we’re we’re under contract with them well do you really think you’re going to go after them if they all of a sudden pull out it’s just not going to happen if they’re going out of business you’re not going to get anything out of them it’s just not going to happen right so so pass on it um so so anyway we really like the cash flow statement is important for what you as an entrepreneur can generate in that particular business and that’s really what our sole focus is additionally from a cash flow statement standpoint we’ve seen stores that are advertised of so much potential and you could introduce wash dry full we we can’t value we can’t put that in a cash flow statement and put a multiple based on potential and yes i love when folks do that because it gives gives us the ideas i mean they’re great right but we can’t pay for those types of things if they don’t exist when you’re putting together your cash flow statements to acquire the locations yeah one of the things i say i do uh i do a webinar every single week right and i in in the normal rotation is how to buy your first laundromat or and uh how to analyze a laundromat deal in terms of valuation right so those are in like rotation there they’re going like once a month each or something like that which by the way a lot of my resource.com slash events to see what the upcoming webinars are uh including our uh q a coming up uh man i just keep keep plugging that sucker absolutely we’re gonna have so much fun i’m excited i mean i am so about it okay yeah anyways one of the things i always say right is like hey you know you’re gonna hear all the time don’t pay for uh potential pay for performance and you know i say we hear that a lot but what we don’t hear a lot is what exactly does performance mean and performance is a very specific thing and it’s a specific number right and it’s that cash flow that net operating income that equates to performance and that’s what we’re paying for so like you’re saying hey it’s great to get the ideas and yeah man awesome we could add wash dry fold or we could increase the vent price or whatever and that’s gonna hopefully help this business do even better well that’s your risk to take right that’s your work to do and your risk to take and you don’t pay for for the risk right and you know i going back also to your other sort of ancillary incomes and you know that discussion i run into this a lot to not just gaming machines but all the other stuff right and it’s one of the benefits actually of having a laundromat is that laundromats can be a great side income and then they have side incomes within the site income right but uh you know we’re trying to value you know the business the core business and what you i like what you said the event price the washer i fold the pickup delivery that the operator can generate themselves and i love that because you know i see in my consulting and coaching i see all the time where laundromats are trying to hide the poor performance of their laundromat behind some of these ancillary incomes absolutely right and when you strip it all away they look very exciting and enticing but when you strip away some of these other things that may or may not be permanent you just can’t count on them all of a sudden the laundromat doesn’t look so good right it’s like it’s like a monet right you get a little closer and all of a sudden you’re like oh what this doesn’t even look like art anymore it just looks like dots or whatever right like and so so you know that’s one of the things that i see that’s very common so i like that you say that but i also get on the other side where that’s really frustrating for somebody who’s either trying to sell their laundromat or who’s trying to buy a laundromat because you see these income streams or these gaming machines or whatever and they’re bringing in you know a couple thousand dollars extra a month and that’s basically all profit that’s coming in and it looks so enticing but like you said that stuff can just go like that and there’s nothing you can really do about it it can and we’ve seen in certain states too where these gaming machines are in these mats and it’s illegal to even have these things oh yeah i get calls like that all the time yeah i mean it’s it’s just nuts but yeah i mean as it relates to about these cash flow state statements jordan as well too like on some of these locations you know i’m always going to try to put in like equipment debt servicing um you know and and factor that in a couple of years down the road right not just now but we want to factor in at some point you’re going to have to retool an acquired location if you’re not retooling it right away right so if that’s the case you know i do get questions sometimes where say the equipment right now is 10 years old okay or 12 years old and there’s a misconception potentially out there with entrepreneurs that think oh okay well you know uh lenders will finance for 10 years 10 year old equipment well that’s not necessarily true right i mean trying to finance 20 year old laundry equipment is certainly challenging so as the equipment ages it’s a good rule of thumb and again bring your questions for for this question and answer session how old is too old where you start reducing that 10-year term down to nine down to eight down to seven you know where you say okay we’re not going to finance this anymore you know anywhere past this particular time period right um so that’s important to factor in on the debt servicing in the cash flow statement because sometimes folks will come to me with a 10-year amortization you know for a store that has 12-year-old equipment i said no no we’re gonna we’re gonna back that down to maybe five or seven years right and it changes the numbers substantially right so that’s something to understand as well like when we when we put together these cash flow statements uh we do want to come up with not only the acquisition debt servicing but also retooling and we can give approximates too for potential owners because i get this all the time too how much is a 20 pound machine in general how much is a 40 pound machine and like rates what do you think’s happening to equipment pricing going up going up okay and for good reason right it just is simply put everything is more expensive and again that should not be a hindrance to getting into the business where you look at a retool and you say oh my gosh three hundred thousand dollars right that’s where folks like you you and i jordan we help these entrepreneurs out and we say hey if you do retool this store you’re not going to make anything in fact you’re going to lose money for the next seven years you may want to think about a different location right um so anyway we’ll dive into that yeah that’s are there i mean going back to the equipment age quite i mean is there is there are there any rule of thumbs or is it is it very you know individualized in terms of type of equipment or i will tell you right now love it okay so so uh great question i love this okay so this this is another scenario too for the q a session right um i’m more likely to do something a little outside of the box when there’s multi-load equipment involved okay and what i mean by that is if you came and you said hey my store has 30 washers in it but 25 of them are top loaders no not happening right but if you said hey 25 of them are you know 20 pounds and greater maybe we can consider something a little bit different so i’ll explain some of those things but in general top loaders i mean those are throw outs right i mean when you acquire a store it’s just it’s a throwaway um but in general jordan in the old days okay in the old days we used to look at equipment that was 15 years old and say hey how do we work the steel how do we work it you know the cash flow is really good um but nowadays you know you start getting equipment on these acquisitions that’s eight nine ten years old you know from our standpoint we want new equipment in the location because we’re we’re we’re crafting we call ourselves financial advisors to these folks that are getting into these businesses right so we don’t want them to get in with ten-year-old equipment and then all of a sudden maybe it doesn’t go right you know they made some challenges the first two years and then the competitor down the street has retooled now we’re in a challenging predicament so we’re almost suggesting more and more when this equipment gets to that 10-year point as part of an acquisition jordan we really want to see a retool of the store yeah and coincidentally at least right now that used market is top-notch so it is the challenge though jordan is that the used equipment out there because the delays on new equipment right now are you know nine months 12 months across a lot of manufacturers okay i don’t want to say all but a lot of manufacturers and a lot of distributors struggle not all but there’s not as much used equipment that exists out there and the quality of the used equipment that’s out there um there’s certainly obviously great quality equipment that’s out there okay no doubt about it but different when there’s such demand for it right i mean we didn’t have this level of demand we haven’t in a long time yeah yeah it’s it’s pretty wild everything that’s going on right now it’s well it’s nuts because then then you have us formulating a business plan with the customer that includes you know an acquisition plus new equipment and when’s the new equipment going to get it right yeah i know a while and and you know here’s the other thing too that’s challenging you know and we should talk about this on the q a as well that if you acquire a location you know just six months or a year ago we used to be able to you know kind of understand whether or not a competitor was in the process of retooling down the street now you don’t know they may have ordered equipment nine months ago and it’s coming in next week right you don’t know it’s it’s just so wild out there right now because of these these equipment delays for the new equipment that exists yeah well does that does that factor in with the loan at all like let’s say i want to you know buy a laundromat and then i want to retool it and i come to you and i say hey i want to buy this laundromat we go through you know all the numbers they look good yep but you know it’s gonna be you know nine months or 12 months until that equipment gets there how does that affect the loaner does it affect the loan at all great question i will say that we are more risk adverse the older the equipment is so as you start approaching that 12 13 14 15 year time period of equipment certainly it’s gonna affect things a little bit more as opposed to if we’re in year eight nine or ten so most definitely yeah yeah well and it kind of reminds me a lot of this stuff kind of parallels this is a little we didn’t really even talk about this but a lot of beforehand but a lot of this kind of really parallels uh like your lease too right so you know for example you know we’re talking about rates with the lending you know landlords have i’ve found uh that landlords have been less and less excited about signing long-term releases because inflation’s going up like crazy there’s a lot of uncertainty all that stuff um so getting that lease locked in for 20 25 years you can still do it i mean people are still doing it i’m still doing it with uh the investment fund that we’re doing but uh it’s getting difficult you know there’s more challenges more hurdles to overcome to get there and there’s i’ve definitely seen plenty of landlords drawing the line at five or ten years which factors into i mean you’re not gonna finance equipment for ten years if you’ve got a five year lease you got seven years exactly right our loan has to be for it you know the term of the lease has to be our loan has to be within that term of the lease no doubt about it okay and another thing in the old days as well jordan that’s different even over the last couple of years you know asking for these rent abatements when you’re going in asking for you know shared build-out expenditures um we’re seeing a lot more landlords saying sayed all this as well um there are some there’s no doubt about it we’re also seeing a lot more options right three year options as opposed to five year options um to your point and don’t be discouraged by it it’s just the way it is it’s what’s happening in in the uh uh in the world right now and and landlords really they’re there’s some scenarios where they just they’re going to get what they’re asking for i mean they’re just going to get it um so i mean don’t be discouraged by it it is what it is yeah and i i mean just one i mean well you tell me if you agree with this i think you will but uh you know just i i talk to a lot of people i talk to you know 20 25 people uh consulting clients every single week and a lot of these questions are coming up and you know i i tell my clients to tell me if i’m telling them the wrong thing but i tell my clients all the time like hey if you can’t get a lease that’s i tell them bare minimum 10 years and i’m still even feeling uncomfortable at 10 years if you can’t get it you know you got to pass on that deal like you can’t it’s too risky for a laundromat and you know one of the going back to my webinars one of the examples i give is like hey if i own you know a shoe store and my landlord doesn’t renew the lease or triples my lease my rent amount i just move down the road no big deal u-haul and a weekend right a laundromat you can’t do that you gotta have the time to make that investment worth it yeah and i just saw actually i saw at least a couple of weeks back it had a big box provision in it again and this is yeah i’m walking away you gotta walk away for those that don’t know what that is ultimately i mean that’s like a you know you have 90 days basically to exit the building if it’s going to go ahead and get you know purchased by a big box retailer and they’re going to wipe it out you can’t just move it down the street it’s not going to happen right but to your point jordan absolutely on board with what you said i mean we want as long of a term with options as possible too and when we talk term if it’s an additional five year lease and you have three five year options fine that’s okay so that initial term doesn’t have to be ten years it’s initial term with options needs to be for at least the term of our loan right yeah and and i would say i mean aside from the loan aspect of it in that lease make sure those options are predefined uh where the rent increases and all that are all defined and uh assignable or assumable uh so that if you go to sell that laundromat down the line those options still apply to the new buyer oh i’ve got another one this is another new one oh i like it this is actually this is exclusive hot off the presses right now podcast i love it i love it another one i just saw recently this is crazy okay the least referenced a web page okay and on the web page it discussed the ability of the landlord to increase the rent even though they’re locking in the payment amounts it’s a policy that is referenced that basically says we can increase the rent x percent per year if we deem x y and z okay and it’s like a management type of a situation right if we’re going to hire a management company to come in and ultimately manage the property we can go ahead and do this well guess what the landlord does they employ their cousin to go ahead and be the management company and all of a sudden you’ve locked in a lease and guess what that policy that’s on that web page there’s nothing nothing you can do about it nothing you can do about it so make sure when you’re reading these leases if they are referencing online policies make sure that these things are clearly defined because we have tendencies to just say oh okay i get it you know privacy policy online or or this particular policy any lease that’s going to reference that it can change at any time and have anything in there even if you’re locking your rate in it’s going to go up yeah that’s a new one on me too especially referencing a a website i mean i’ve seen referencing an addendum or something like that but uh man that’s crazy uh i mean okay look at this is not uh i’m not trying to pat you on the back or anything but i i tell clients this all the time like hey if you’re looking to buy a laundromat whether you’re planning on buying cash or getting financing i always recommend hey at least talk to if not use a laundromat specific lender before you do that even if you plan on buying cash because of things like this right chris is saying yes i’m going to throw my talent with you i’m going to bet on your success in this business i’m putting my money in with you you know lending it to you and i need to make sure that you succeed otherwise you know me and my investors we don’t get paid right this is what chris is saying and and he has the knowledge and the network to help you decipher stuff like this right because this feels very like if i had heard this when i was first trying to buy my first you know laundromat first of all it would have saved me a lot of money uh second of all it would have really overwhelmed me and kind of freaked me out a little bit because there’s a lot of like nuance that we’re talking about right now right that how would you know to look for that stuff unless you knew right and so i always recommend hey talk to you know hire consultants sure talk to another owner who knows what they’re doing sure but uh uh a laundromat specific lender is someone who knows the business who if you know if something happened god forbid also has a network of you know people who are knowledgeable in the industry who can kind of help you work through that if you need to but who can also vet these deals alongside you and so i recommend you know even even my clients who have cash looking to buy hey don’t buy cash go get a loan and and let you know somebody like chris money chris maholic here help you buy the right laundromat for the right price the first time and then after you’ve kind of wrapped your head around it then go buy another one with cash if you want to but uh big deal big uh you know just what’s the saying i always butcher the same just like don’t trip over pennies to or don’t trip over dollars to pick up pennies i don’t know whatever that’s it like don’t don’t skimp on on getting the right people in your corner if you’re gonna drop tens hundreds of thousands of dollars plus on a business make sure you invest what you need to invest to make sure you’re getting the right investment yeah and we can help you out like like jordan said any laundromat specific blender ought to be able to help you out with this stuff and look through each scenario is different that’s why i’m so pumped i’m going to put you on the spot i don’t know how long you want to go with this q and a session i’m hoping it’s a total winner and we get a ton of folks on this thing i want to go along but that’s all that’s all up to you we’ll go as long as there’s questions man i don’t well we’re making an all-nighter for all i care i don’t i don’t know well i gotta cut it some point but i’m pumped about it i got to take my kids to school at about you know 7 40 or so in the morning so if we go till about 7 30 i can get a little uh you know pick me up breakfast and go today no but seriously i mean hey you know we’ll go as long as we need to go but i i mean i think that that is uh man a huge opportunity for people especially if you’re in the market for your first laundromat or if you’re in the market for you know uh expanding your your portfolio and growing your business there absolutely and and check over your loan papers between now and when we have this this q a session bring your questions take a look you got a little bit of time i love that and even if you i think i already mentioned but even if you don’t man come listening because you’re going to learn a ton of stuff absolutely uh man i i mean i feel like we could just kind of keep rolling is there anything you feel like we need to mention before we close this thing up i know we’re going to talk again here in about a week with this q a but anything else you feel like we need to cover no okay i think i’m pumped i can’t wait for the q a jordan i’m i’m pumped too it’s gonna be great hopefully it’s gonna help a ton of people out and uh man i just i love what’s happening in this industry right now i love that you know there’s good people like you and a lot of other people that i’ve had on the podcast who have not yet had on the podcast uh who are just doing big things in this in this business and wanting to see each other succeed that’s what i’m all about i know that’s what you’re all about absolutely and uh dude appreciate you coming on with me today and cannot wait to hang out again uh in about a week all right so much good stuff with chris money today it i that was just amazing hopefully it just wet your appetite for that live q a that we got coming up april 28th 2022 again lot of my resource dot com events to get signed up for that one so uh super cool super exciting about that uh all right my one kind of big takeaway is an obvious one the you know every week i say choose one thing put it into action this week the takeaway for me and at least one of the takeaways from you should be be at that live q a april 28 2022 get your questions answered all right all right i will see you next week on the line of my resource podcast but i will also see you next week on that live q and a lot of my resource.com events
