Dry Cleaner
Business Loans

The type of funding you’ll need, the loan’s term, and the amounts will all vary depending on if you’re already in business or opening a new dry cleaner.

Existing business owners have a history of cash flows and income statements to show a bank when applying for financing. You also likely have a good idea of how you plan on using the funding – whether it’s expanding into a space next door or adding machines – and can demonstrate the increased revenues that will bring into your business. 

If you’re opening a new dry cleaner, you’ll need a robust business plan and strong cash flow projections when you apply for a loan. Banks will want to see how you plan on making money, the amount of capital expenditures involved in opening a new store, and when you’ll turn a profit. Newer small business owners, without a past track record of success, will find it harder to obtain a loan from traditional funding sources. 

Opening a new dry cleaning store? Plan on leasing and possibly renovating a space, buying and installing machines, and paying utility bills. Renovating or expanding a new shopfront? You could face many of the same costs. 

Here are some of the most popular reasons dry cleaner take out small business loans

• Purchase new equipment to replace old or broken machines
• Expand into more space or open a new location
• Add a wash and fold service
• Cover operating expenses during lean times

How you intend to use the funds dictates the type of funding and term that best fits your business purposes.

Regardless of your plans for the borrowed capital, and their success, you will have to make payments on the loan. Typically, those payments come due before your plan’s completion, and before it begins generating revenues. 

Before borrowing, ask yourself if your business’s cash flows are enough to make loan payments and still meet your other obligations. Add up your fixed expenses – like rent, utilities, and payroll – and determine how much free cash flow you have each month. If it’s not enough to cover the payment reconsider borrowing or borrow less. 

A loan payment consists of a portion of the amount borrowed plus interest and fees, spread over the repayment term. Therefore, borrowing less reduces your monthly payments since it would reduce the base on your loan payment, and the amount on which a lender charges interest.

Your ad agency’s cash flows must cover the loan payments – particularly if there is a delay between cash outflows and inflows. Make a budget before borrowing and include a plan to pay back the loan. 

It’s not enough to know if adding a professional machine will generate another $14,000 a year in revenue – will it make a profit? If you have to take out a $40,000 loan to buy the machine, you’ve actually lost money. 

Any project you plan on using borrowed funds to complete should do more than cover the loan’s cost – it should also produce more income for your business in the long run. Evaluating a potential project can get quite complicated.  A simple expansion has many variables.

For example, the storefront next door has become empty and you have the opportunity to lease it and expand your space. Based on square footage, you could add one more machine at a cost of $40,000 with potential yearly revenues of $50,000. 

Your landlord is willing to give you a reduced rent because you’ve been a good tenant, so rent would be $2,000 for the expanded space. If you took out a loan for a three-year term at 10% interest, your monthly payment is around $1,300. Based on that, you’d have a $866 profit, right? 

Wrong. Running the additional machine will increase your electric bill. In the winter, you’d have to pay to heat the expanded space and in the summer customers may expect A/C. Don’t forget maintenance and repair costs if the machine breaks down. 

Before taking out a loan to fund a project, take the time to check if the project’s impact on your revenues will both pay back the loan and generate a profit. 

Your credit score and business’ credit history are an important part of any loan application. Lenders view a credit score as a sign of your creditworthiness, and it will impact their willingness to lend to you and the loan’s terms. Small business owners with poor credit will find it harder to borrow because lenders view them as a bigger risk. 

Before applying for a loan, check your credit score. Knowing it will give you an idea of the interest rate you’ll pay to borrow and which lenders will lend to you. Since a lower credit score reflects higher risk to the lender, you’ll pay more to borrow. 

How long will you need to borrow? A loan’s term is the length of time you can take to repay the funds. As a rule of thumb, you don’t want to still be paying on a loan when you’re no longer receiving its benefits.

For example, let’s say you’re taking out a $50,000 loan to buy a new dry cleaning machine. The machine will be fully depreciated after three years. If you took out a five-year loan to finance the purchase, you would still be paying on the loan after the machine had no value (and already might need replacing).

For larger projects and capital investments, apply a matching principle. The funding’s term should expire when the project is done or its benefits have been realized. 

Maybe you need access to funds on a rolling basis – to cover payroll, help pay rent during a slow month, or to draw upon for unexpected expenses. In that case, a line of credit would work best for your situation. 

With a line of credit you can draw on the funds as needed. While you might have to pay a fee to keep it open, you only owe money and have to make payments if you’ve drawn on the line. They work similarly to a credit card, but often with lower interest rates.