Why laundry businesses use CSBFP
A laundromat is primarily an equipment business. The machines are the revenue-generating assets, and equipping a laundromat from scratch or replacing an aging machine fleet is a significant capital outlay. A well-equipped 20-machine laundromat requires $80,000–$200,000 in equipment alone; the plumbing and electrical infrastructure to support those machines adds another $40,000– $100,000 in leasehold costs.
CSBFP’s equipment category covers commercial laundry equipment directly, and the infrastructure required to run that equipment — water lines, drain troughs, electrical panels, ventilation — is eligible as leasehold improvements. Combined, these are exactly the kinds of long-lived, identifiable capital assets the program is designed for.
Eligible CSBFP costs for laundromats
Equipment
Commercial laundry equipment eligible under CSBFP:
- Front-load washers: Commercial coin-operated or card-operated front-load washers (Speed Queen, Electrolux, Maytag Commercial, Alliance, Continental) in multiple capacities (18 lb, 20 lb, 40 lb, 60 lb, 80 lb)
- Tumble dryers: Commercial stack dryers, single-pocket dryers, and large-capacity single-pocket dryers (30 lb, 45 lb, 75 lb)
- Payment systems: Card-payment and mobile- payment management systems permanently installed in the facility (card readers integrated with machines, central payment kiosks, management and monitoring software as capital hardware)
- Water heating and treatment: Commercial water heaters and water softeners permanently installed as capital equipment
- Dry cleaning equipment: Dry cleaning machines (perc-based or hydrocarbon/GreenEarth solvent systems), finishing equipment (pressing machines, steam pressers, tensioning forms), spotting boards
- Drop-off service equipment: Commercial washer-extractor and tunnel washer systems, industrial dryers, folding tables (as capital fixtures), conveyor and staging systems
Leasehold improvements
The infrastructure that makes a laundromat operate is among the most significant leasehold improvement items of any retail-service business:
- Plumbing: Individual water supply lines to each washer, drain troughs running the length of the washer row, utility sink, drain connections to municipal sewer (a 20-machine laundromat may require 20 separate water connections, each with hot and cold supply)
- Electrical: 240V dedicated circuits for each dryer, service panel upgrade to accommodate the combined electrical load (a fully equipped laundromat may require 400–600 amp service)
- Ventilation: Dryer exhaust ducting (individual runs to exterior, or a shared exhaust manifold system), make-up air for combustion appliances (gas dryers), HVAC adequate for a hot wet environment
- Flooring: Sealed concrete or tile with floor drains — the base building floor is typically not adequate without treatment
- Structural modifications: Machine mounting pads, drain trough installation, wall reinforcement for equipment mounting
Real property
Owner-operators who purchase the building housing their laundromat can finance it under CSBFP’s real-property category (up to $1M within the overall term loan ceiling). Laundromats are frequently located in strip mall units or standalone buildings that trade at accessible prices in secondary markets — real-property purchases are not uncommon in this sector.
New laundromat vs. acquiring an existing one
Laundromats are one of the most actively traded small businesses in Canada — they are frequently sold as going concerns. The acquisition structure matters for CSBFP:
- Asset purchase: Buying the equipment and leasehold improvements of an existing laundromat is eligible for CSBFP financing — the equipment purchase price is a CSBFP eligible cost. The lender will want an independent appraisal or a third-party assessment of the equipment value to confirm the purchase price reflects fair market value.
- Share purchase: Buying the shares of an incorporated laundromat business is not directly eligible — shares are not a CSBFP eligible cost. The acquisition can be structured as a new corporation that purchases the assets from the selling corporation, which preserves CSBFP eligibility.
- Equipment refresh on acquisition:An acquirer who takes over an existing laundromat and immediately replaces the aging machine fleet — financing the new equipment under CSBFP — is a common and clean structure. The lender finances the equipment refresh; the buyer’s cash covers the goodwill and business purchase price.
Revenue model: machines as revenue units
Laundromat revenue is modelled from machine turns — how many times each machine runs per day and what it earns per cycle.
- Washers: A typical urban laundromat washer runs 4–8 turns per day at peak, 2–4 in off-hours. At $3.50–$5.00 per wash (standard capacity) to $6.00–$9.00 (larger loads), annual revenue per washer ranges from approximately $5,000 to $12,000 depending on location and market.
- Dryers: Dryers generate less revenue per machine than washers but have a higher turn rate (shorter cycles). Revenue per dryer is typically 40–60% of the adjacent washer revenue.
- Drop-off and wash-and-fold service: If the laundromat offers attended drop-off service, revenue is modelled by weekly volume (pounds of laundry) at the market rate (typically $1.75–$3.00 per pound).
A laundromat lender will cross-reference the projected revenue per machine against comparable operators (if available) or against the location’s demographic profile (population density, apartment-dweller percentage). High-density urban locations in apartment corridors generate significantly higher turns than suburban strip-mall locations.
Operating cost profile
Laundromats have a distinctive operating cost structure:
- Utilities (water and gas/electricity):The dominant variable cost. Water consumption and dryer energy (gas or electric) scale directly with machine turns. A high-volume laundromat can spend $4,000–$8,000 monthly on utilities.
- Labour: A self-service (unattended) laundromat has very low labour cost — an owner-operator may need only 4–6 hours per week of maintenance and cleaning time for a smaller facility. Attended laundromats with drop-off service have higher labour costs.
- Rent: Fixed cost. The rent-to-revenue ratio is the key benchmark — a laundromat with rent above 15–20% of gross revenue is operating in a tight margin environment.
- Maintenance and repairs: Commercial laundry equipment is durable but requires regular maintenance. Budget 3–5% of revenue for maintenance on a new machine fleet, higher on aging equipment.
A worked example: new coin laundry build-out
An operator signs a 10-year lease on a 2,500 sq ft strip mall unit in a high-density rental neighbourhood. Project:
- 20 front-load washers (mix of 20 lb and 40 lb): $120,000
- 14 stack dryers and 4 large single-pocket dryers: $80,000
- Payment kiosk and card system: $18,000
- Leasehold improvements (plumbing, electrical upgrade, exhaust ventilation, flooring, drains): $95,000
- Total: $313,000
Equity injection: $40,000 (approximately 13%). CSBFP loan: $273,000. Structure check: $313,000 non-RP — inside the $500K sub-limit ✓. Lease 10 years ✓.
Revenue projection at steady state: 34 machines, average 5 turns per day, average $4.25 per cycle = $144.50/day per machine × 34 machines × 365 days = $1,793,225 theoretical max. At 55% utilization (reflecting mixed on-peak/off-peak turns): approximately $985,000 gross. After utilities ($72,000), rent ($72,000), labour ($24,000), maintenance ($30,000), and insurance/other ($18,000): EBITDA approximately $769,000. Annual debt service (term loan at 7.95%, 8-year amortization): approximately $50,400. DSCR: 15x+.
The math on a well-located laundromat is typically very strong on a pure DSCR basis — the question the lender will press is the utilization assumption and the market evidence for it. What is the nearest competitor’s capacity, and can this market support 55% average utilization at the projected pricing?