Commercial laundry equipment finance for washers, dryers and ironers

Asset finance lenders judge equipment by what it would fetch if they had to repossess and sell it. Commercial laundry machines from recognised manufacturers do well on that test because there is an active second-hand market and the kit lasts for years. The items we are most often asked to fund are

• Washer-extractors, from small vended machines for a launderette to high-capacity soft-mount machines for contract work
• Tumble dryers, gas or electric, including stacked units where space is tight
• Flatwork ironers, folders and feeders for sheets, tablecloths and duvet covers in hotel and contract laundries
• Barrier washers with separate dirty and clean sides for care homes, hospices, clinics and nursing homes
• Finishing equipment, such as garment presses, form finishers and tunnel finishers
• Boilers, water softeners, dosing systems and heat recovery units that keep the plant running efficiently
• Payment systems, including card and app readers for vended machines, which lenders treat as soft assets and usually bundle with the machines

Pipework, gas supply, ducting, drainage, electrical upgrades and building alterations are not part of the machine, so most asset lenders leave them out. They are funded on a loan instead, which we cover below. For a dry cleaning machine or a solvent system, see the main dry cleaning business finance page.

Laundry services are standard-rated, so a VAT-registered launderette, contract laundry or hotel reclaims the VAT on its machines. On hire purchase the VAT is normally paid at the start and recovered on the next return, so the real cost is a short cash flow gap, and some lenders will fund the VAT over a few months to close it. On a lease the VAT is charged on each rental instead, which spreads it without any upfront outlay. A care home is in a different position. Welfare services are largely VAT exempt, so a care provider often cannot recover the VAT on a barrier washer, and the partial exemption rules decide how much, if any, comes back. That makes the total cost of the machines higher and tilts some care providers towards leasing, where the VAT is spread across the term. Where the VAT on a large order is a strain, a short VAT loan can bridge the gap until the return is paid.

On tax, a business that buys on hire purchase normally claims capital allowances on the machines, and the Annual Investment Allowance lets most laundries deduct the full cost in the year of purchase. Lease rentals are usually deducted as a trading expense instead. Your accountant will confirm which treatment suits the business.

Illustration only, with round hypothetical figures. A launderette on a busy high street has eight washers and eight dryers that are twelve years old and breaking down weekly. The owner is quoted £90,000 plus VAT for a new bank of machines, including card readers, and £15,000 for the gas, ducting, drainage and electrical works. The purchase is arranged like this.

• The £90,000 of machines goes on hire purchase over five years with a £9,000 deposit, so £81,000 is financed and the launderette owns the machines after the final payment.
• VAT of £18,000 is due at the start. The launderette is VAT registered, so it reclaims the £18,000 on its next return and the lender agrees to fund it over three months in the meantime.
• The £15,000 of works does not interest the asset lender, so it goes on an unsecured business loan over three years with a personal guarantee from the owner.
• The lender's question is whether the takings, after rent, utilities and the owner's drawings, cover both new repayments with room to spare. The case is helped by the fact that the new machines use less gas and water than the old ones and take card payments, which usually lifts turnover.

Hire purchase over five years matches the expected life of the washers and dryers. A shorter term on the works keeps the business from paying for ducting long after it has been written off. What the monthly figures would be depends on the lender, the deposit and the credit position, which is why it is worth seeing offers from more than one.

• Supplier quotes showing make, model, price, VAT and installation costs separately
• The last filed accounts and recent management figures, or a trading forecast for a new site
• Three to six months of business bank statements
• A schedule of existing finance, including any machines still on hire purchase or lease
• For a hotel or care home, a note of why the laundry is coming in-house and what linen hire currently costs
• For used machines, their age, serial numbers and the seller's proof of ownership

New machines from the main manufacturers are the simplest to fund and usually carry the longest terms. Refurbished machines from a recognised dealer are also widely financed, often over three years rather than five, provided the dealer gives a warranty and the serial numbers can be checked. Private sales of used kit are the hardest, because the lender has to be satisfied that the seller owns the machines and that nothing is still owed on them. If you already own a laundry and want to release cash from it, sale and leaseback turns the machines into working capital. The Textile Services Association, the trade body for commercial laundries, publishes guidance on standards and energy use that lenders sometimes ask about on larger plant.

Match the term to the life of the kit, and do not stretch a loan for building works over five years just because the machines are financed that way. Check whether a lease has a secondary rental period that keeps running until you give notice, and whether a service contract has been bundled into the finance so that payments continue after support ends. If the business is partly VAT exempt, make sure the VAT cost has been included in the comparison between buying and leasing. Finally, be realistic about throughput. A hotel bringing laundry in-house saves money only if the rooms keep the machines busy, and a lender will test that assumption before it lends. If you are unsure about guarantees, our guide to personal guarantees and personal guarantee insurance explain what you are signing.