Laundry and Dry Cleaning Finance

Some industry observers may have predicted an unsettled future for garment cleaning. Clothing has become more affordable. Instead of a few expensive, well-made garments that lasted for years, the trend is now for cheaper clothes, some of which might only be worn once before being discarded.

However, despite this - and the move away from formal workwear to a more relaxed look in many businesses - people still need clothes cleaned, and may even be cleaning them more than in the past.

Busy lifestyles, with less time for home cleaning, and smaller homes with no space for laundry equipment, may be supporting a recovery in the sector.

In addition, there is a growing demand from corporate clients, including hotels and restaurants, and those offering uniformed services for cleaning.

Certainly, there are opportunities for two distinct types of garment and textiles cleaning businesses: dry cleaners and the ‘wet’ cleaners – laundries and launderettes.

Dry Cleaning

Dry cleaning has traditionally worked by using solvents rather than water, helping to preserve the shape and structure of tailored clothing.

These solvents have become a focus of concern on health and environmental grounds. However, improving technology means that there are whole systems which use ‘green’ alternatives to the traditional solvent chemicals - even a dry cleaning system that uses water. All work in a similar way, using recirculating solvents to flush dirt and contamination from fabrics, followed by a purge process which should remove all trace of solvent. The process is concluded by hand finishing, which may involve pressing the clothes, and their folding or hanging and covering, ready for collection.

While demand for the regular cleaning of office and career wear may seem to have declined, the resurgence of natural fibres – as opposed to the ‘easyclean’ synthetic fabrics may be helping to support a renewed popularity for dry cleaning.

How dry cleaning businesses work

Several business models have evolved for dry cleaning.

Traditional high street cleaners

These do their own cleaning on-site. Large premises with sufficient space for machines, finishing work and garment storage are essential. Also vital for success is having the right location. A busy high street, with passing trade and ideally parking and public transport nearby could be important factors in bringing in business.

‘Agency’ cleaners

Dry cleaners who work as an agency simply take in clothes and use a third party to do the actual cleaning. Premises can be smaller and there may be no need to invest in expensive equipment, but location may be of even greater importance. A location in or near train stations is popular for this type of business, allowing customers to drop off and collect clothes during their daily commute. Some supermarkets are now also offering this service.

Industrial cleaners

These are the third parties used by agency cleaners, and are generally large, specialist businesses working from industrial units. They have no direct contact with customers. They will, however, have the additional cost of providing collection and delivery, with vehicles and drivers serving customer-facing clients.

The work itself

Whatever the business model you choose, there is more to dry-cleaning than simply feeding clothes into a machine and packing them for customers to collect.

All garments must be given the most appropriate cleaning regimes and some training may be required, even qualification as a stain removal technician.

Clothes will also require pressing and hand finishing. If you run an agency-type business, your cleaning contractor may be able to take care of all these tasks for you, although you will still need to open early and stay open until late - and work weekends – to allow customers to drop off and collect at times that suit them.

There is also scope to offer additional services to improve profitability. Invisible mending and alterations, shoe repairs, key cutting and carpet cleaner hire are all services offered by some dry cleaners. You can also add additional specialist cleaning for items like curtains, duvets, leather and suede.

Rules and regulations

Solvents are central to dry-cleaning, but their use poses potential human and environmental hazards and is strictly regulated. It is, therefore, essential to have effective solvent management to protect staff and your surrounding environment.

Perchloroethylene, or ‘perc’, the standard industry solvent, is the subject of strict legislation which you should be fully aware of. Newer alternative solvents may be less hazardous but still require careful handling.

To operate any type of dry cleaning machine, you will need to have an environmental permit from your local council.

This is a legal document which allows an operator of a dry cleaning machine to emit air pollution under strictly controlled limits. Operating without a permit is an offence and comes with a maximum penalty of £50,000 or 5 years' imprisonment.

In addition, your premise must meet all the appropriate standards for electrical and water safety. Legionella may be a particular risk and must be prevented by following the prescribed procedures.

The costs involved

The upfront costs of setting up a dry cleaning business will depend on the type and size of business you want to run, and whether you will operate your own cleaning plant.

Dry cleaning machines are rated in pounds of fabric they can take, ranging from around 20 pounds to over 100. Heavy-duty machines have a life cycle of up to 20 years, however, for most machines, the life cycle is closer to 10. If you are buying second-hand or into an existing business, it’s important to know how old the machines are and how well they’ve been serviced – it is important that they meet current environmental and health and safety regulations.

For an established business with a good location, a good trading history, some value-added services and no local competition then you should expect to pay around £100-150,000. Expect a turnover of around £90-100,000 with a net profit of around £60-70,000. In terms of staffing your business, you’ll probably need one full-time, fully-trained member of staff and one part-time counter assistant, along with yourself.

The costs may considerably higher if the business owns the premises it operates from.

Laundries and Launderettes

Launderettes and laundry services are certainly enjoying a renaissance. Cash-rich, time-poor customers and those with no space for washing drying and ironing facilities at home are helping fuel this recovery in the sector.

Internet access, TV and vending machines – and clean well-lit interiors – are helping attract a new type of customer. While most launderettes are still located in districts with low-income or transient populations, they are increasingly appearing in city areas, where they have gone upmarket.

Launderettes can operate virtually without staff, requiring only someone to open up and check machines and to do a little cleaning. However, the real potential for profit does not come from the standard coin-operated washing machines, but form the service wash, in effect, a laundry service where customers can have their clothing washed, dried and ironed for a set fee.

There is also scope for laundry businesses which collect, clean and deliver clothes. These are usually based around a centralised commercials laundry facility.

The costs

The cost of setting up a launderette is fairly high. Premises are absolutely crucial and, as a mature industry, it is safe to assume that the best locations - most profitable and with most customers - are in use.

A minimal setup of five standard and two large washing machines, plus an equal number of dryers, is around £30,000. There will also be costs for security and for meeting all the demands of the local authorities for environmental provisions, with the installation of flues, air vents. You will need new power supplies and probably dehumidifiers to remove excess water from the atmosphere to provide an attractive and healthy environment.

It may, therefore, be most cost-effective to buy an existing launderette, even if it does require substantial refurbishment.

Funding for your dry cleaning or laundry business

Whether you are starting up, buying into an existing business, or ready to move your current business on, finance will be key to your success.

The costs you may face include:

• Premises - leasehold or freehold, the costs of premises in the best locations will be substantial
• Shopfittings - worn interiors with cracked tiles put off customers. A clean, attractive interior has become essential for all types of garment cleaning business
• Equipment - a large, centralised dry cleaning plant will require equipment costing £100,000 plus - even a small launderette may need £25,000 worth of machines
• Ventilation - the standards required for ventilation are high for both dry cleaners and for launderettes
• Vehicles - delivery vehicles may be essential for central laundry and dry cleaning businesses.
• Staff - skilled operatives may be required by many types of business
• Cashflow support - many businesses will face variations in levels of custom - launderettes, in particular, may be busier in winter.

You may also need funding to buy an existing business.

At Rangewell we have found that each of these costs can be met by external support. We provide a personal service to provide you with the most appropriate solution for each funding need.

Funding for your premises

Premises in a central location, ideally with parking and public transport nearby, will be another major cost for any business that deals with the public.

You may need to borrow for the deposit on a long-term lease. Alternatively, you might want to consider a Commercial Mortgage. Commercial Mortgages can help you buy your premises, however, it is uneconomical for you to borrow less than £50,000, and some lenders even have a minimum borrowing limit of £75,000 or more, but there is no set upper limit.

Commercial Property Finance is arranged on an individual basis. Get our help finding the most competitive lender.

Funding for equipment

All garment cleaning businesses depend on their equipment, whether it is a large capacity industrial dry cleaning machine, the washers and dryers in a launderette or a delivery van.

At Rangewell, we have found that Asset Finance can be the most appropriate solution for businesses of all types. By securing funding on the equipment itself - which means it can be taken and sold by the lender to recoup their costs if you do not keep up the repayments - you can reduce the cost of the lending required. Both Hire Purchase and Lease solutions are available.

At Rangewell, we can help you spread the cost of used as well as new equipment with Asset Finance. The terms and rates we can secure are often better than those offered by equipment suppliers, and we may be able to help arrange a single agreement to cover all your equipment needs.

We can also provide solutions which allow you to refinance your existing assets, to free up cash or find you a better deal on equipment.

Funding to buy an existing business

Buying an existing garment cleaning business may require a large investment, but it may be possible to arrange a business loan to provide the necessary finance.

Secured Loans are often used to borrow large sums upwards of £250,000, and so may be more suitable for the sums involved in a business purchase. They are ‘secured’ because the lender will require security in case you cannot pay the loan back. This security could be provided by your home or your business premises.

You can have longer to repay than other types of loans and terms of up to 20 years are common. You can also enjoy lower interest rates than with other types of lending, meaning monthly repayments can be lower and easier to fit in with your cash flow.

Funding for every purpose

There are many other reasons to seek funding. You may want to refurbish your premises, for example, or install air conditioning. We can help find the most cost-effective short-term loans to provide the solutions you need.

Tax Loans

Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems with your cash flow, particularly when it falls at the same time as other costs.

Tax Loans help you to spread the cost of your tax demands into affordable monthly payments.

Working Capital Finance

Working Capital Finance is designed to boost the working capital available to a business. It's often used to provide cash to pay staff and suppliers while business is slow during the early weeks and months of a new practice, or during a period of growth. It is usually designed to be repaid in the short- to medium-term, once your business is fully on its feet.

Why you need Rangewell to find finance for your business

The clothes cleaning industry may be recovering from some lean years, but many lenders are reluctant to work with the sector. Starting up a new business may be particularly challenging.

At Rangewell, we work with lenders from across the entire UK lending market, and we know those who can help.

If you are looking at the possibility of the garment cleaning industry, call us now to get our experts working for you.