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Beau Eckstein [00:00:00]:
Hey. Hey. What’s up, guys? It’s Jordan with the laundromat Resource Podcast. This is show 128, and I am pumped that you’re here today. Because today, we’re gonna dig a little deeper into SBA loans with a good buddy of mine, Boex Dean, and we’re gonna go into a lot of detail. If this is something that you’re interested in, drop me a line, [email protected], and let me know that, and I can set up a live q and a with Beau also who knows his Stuff. He loves us. He helps out with laundromat owners and people who are trying to buy laundromats, to help them qualify for the SBA loan.
Beau Eckstein [00:00:34]:
So you’re interested in that, drop me a quick line and just say, hey. Do an SBA q and a. Look at that rhyming right now. This is great. Anyways, Super exciting episode. A lot of so, so good information, especially if you’re looking for financing for a through my acquisition. Yeah. Okay.
Beau Eckstein [00:00:51]:
So but before we jump into that, couple quick things. Number 1, make sure you’re checking lawnmowerresource.com/events regularly and or your emails that we send out because there’s a lot going on. I know this week, we have 3 different, live q and a’s. I’m doing one with Sue Cant from Terns. I’m we have a a women’s, meetup and live q and a also just for the women in the industry. Way to go, Laura Bercoskie, who who you can book a call with at learnermindresource.com/coaching, by the way. And, also, I’m doing a live q and a on Commercial drop off and pickup and delivery with David Lang this week. Make sure if you haven’t yet and you’re interested in growing or starting a A pickup and delivery or a drop off wash, dry fold business and you want to learn how to get commercial and corporate clients, check out laundromat resource.com/ Accelerator.
Beau Eckstein [00:01:43]:
We’ve got that Accelerator program. We only have a couple spots left, but we do have a couple spots left. That’s good news. So check that out over there, And, listen, the other event that’s coming up in less than a month now from when this is coming out is our live meetup that we’re doing, 1st ever Laundromat Resource live meetup, and that’s gonna be in the Southern California area. We’re gonna be in LA, there. So if you are interested in coming to that live meetup, you if you’re in Southern California or you just wanna come to Southern California for it, it’s 2 hour meetup. We’re getting together. It’s just time for our industry to kinda get together without having to pay 1,000 of dollars to do it.
Beau Eckstein [00:02:23]:
Right? So so we’re doing that In October, check out laundromatresource.com/events or there’ll be a direct link to that event in the show notes or if you’re on YouTube down below. And, If you’re not in Southern California, take heart because the goal is to have these all over the country. And, Listen. In order to make that happen, we’ve gotta come together as a community here. Right? I can’t be at every single one every single time. So my goal is to partner with laundromat owners in, different areas to host these meetups. And, You know, we provide all the support. We provide all the help, to get things going, to make sure everything’s organized.
Beau Eckstein [00:03:06]:
We give you some ideas of what to do and how to do it. If you need people to kinda help you put together an agenda and stuff, we can do that. If you need guests and stuff, we can help you coordinate that. But what we wanna do is partner with you to help launch these meetups all over the country. That’s the goal. That is the aim because I’ve been saying it since the beginning, We’re all better when we’re working together. And when we’re getting together and we’re helping each other out, we’re talking about best practices, we’re talking about how to elevate Everything. Right? Our industry, yes.
Beau Eckstein [00:03:36]:
Our businesses, yes. Ourselves, personally, yes. All of that stuff happens when we get together. So I’m super excited about it. Hopefully, you’re super excited about it. If you’re interested in, co hosting with me in your neck of the woods, wherever that might be, drop me a line, jordan, [email protected]. And, let me know, and we’ll jump on a call and see if we can make that happen. Alright.
Beau Eckstein [00:04:01]:
Alright. Without further ado, let’s jump into it with my good buddy, Bo Exting. Bo, thank you for coming on the show, man. How are you doing?
Jordan Berry [00:04:12]:
I’m doing well. Thanks for having me.
Beau Eckstein [00:04:13]:
It is my pleasure. We’ve known each other for a little bit now here, and so it’s been cool. We’ve been talking about you coming on the show for a little while and, talking lending and SBA loans and all that. So I’m super excited that we’re finally making it happen. I appreciate it. Why don’t you give us a little bit of a background on who you are?
Jordan Berry [00:04:33]:
Sure. So I’ve been in real estate and lending for 25 years. So pretty much I didn’t go to college. I didn’t know what I wanna do with myself other than I either wanted to be a farmer, a police officer, or get into real estate, And I ended up getting into real estate. And I started as a residential mortgage broker, and then, You know, I wanted to be big time. I started buying all these properties. 2007 rolled around. I realized that prices don’t always appreciate.
Jordan Berry [00:05:01]:
That was a kind of a reality check-in the in my twenties. Then I got into hard money lending. And then about 10, 12 years ago, I I started getting into commercial lending. So, and then over the last 5 or 6 years, got into SBA lending. Flipped houses, owned rental properties, Owning a couple small businesses, always trying to learn, and that’s what I really love about SBA lending. It’s like you can be really creative on structuring deals, and happy to be here to kinda share some knowledge that I have.
Beau Eckstein [00:05:32]:
Yeah. Well, first of all, I think you’re big time. So you’re big time in my book. That’s for sure. So listen. You’ve made it. I I mean, one of the biggest questions the The biggest questions I have are always around money, right, and lending and acquisition. It’s It’s really the the barrier to entry in laundromats, right, is that they can, you know, require a lot of capital upfront and a lot of, capital to operate sometimes.
Beau Eckstein [00:06:03]:
So, you know, people are always trying to figure out how can I get my foot in the door? And we were chatting at, a mastermind meeting we were at. And I was like, listen, man. You gotta come talk about this stuff, with my audience because this is this is what people Wanna know what people wanna hear. So here we are. Let’s talk, let’s talk lending and laundromat lending, specifically. What are, what are some of the you know, obviously, loan products are changing and stuff like that, but what are some of the options in terms of Financing, let’s start broad, and then we’ll just kinda narrow it down, and and get into the SBA from there.
Jordan Berry [00:06:40]:
Yeah. I think it It also you know, it all stems with, are you buying just the business? Are you buying the real estate as well? Are you starting the business from scratch? Those are big variables that we we we’d have to figure out. But I first wanna say, a lot of times, newer, you know, investors and operators in different businesses real estate. We see the common things that they do. They they start leveraging their personal credit, and then all of a sudden their utilization is high and their credit scores drop. I always tell people, let’s start with the basics because I’ve made a lot of mistakes. And so what you really wanna do is you wanna really focus on Keeping your credit and your utilization as strong as possible. By doing that, what I would recommend is is setting up a qualified funding entity, and that That gets credit, and that credit doesn’t show on your personal credit report.
Jordan Berry [00:07:31]:
So a lot of people I get this call at least once a week. Hey, Beau. I’m trying to refinance or whatever. It could be a real estate deal. How’s your credit look? Well, you know, it’s normally 7:30, but I have it’s at, like, 580 right now because I’m I’m I maxed all my credit cards out trying to get the business started. That’s the worst thing you can do because that’s gonna trap you. You gotta play the credit credit game and do that from the start. And now, like because I learned the hard way.
Jordan Berry [00:08:00]:
I did that, and my scores went from 729 to 580 when I was rehabbing a house years And I got stuck. I didn’t know it was gonna be basically, the cost of construction was $70,000 more than I thought, so I put on a a couple credit cards. So now, you know, fast forward to the today, I keep up my credit score at around 800, keep my utilization very low, But I I now have multiple business entities with lots of available credit, like a couple 100,000. So I think that mindset getting started is what we have to we have to start with the end in mind. So if there’s any tough times or we’re buying stuff, we have to buy new, You know, machines for the for the laundromat, we can use that, worst case scenario. Obviously, there’s equipment financing. There’s a lot of stuff. But I think Really kinda starting with a good base is the key.
Jordan Berry [00:08:47]:
And then as far as, you know, financing, so
Beau Eckstein [00:08:49]:
Well, can we pause
Jordan Berry [00:08:50]:
I have quick?
Beau Eckstein [00:08:51]:
I mean. Sure. I mean, I think that’s I think that’s huge, and that’s something that’s not talked about a lot. Right? And you mentioned qualifying qualified funding agency. Can you talk about What is that? How do, you know, how how do we get started in in that process of utilizing, like or even starting, like, business credit? Can you just kinda break that down a little bit?
Jordan Berry [00:09:13]:
Sure. And I’m not an expert in business credit. I’m just taking what I’ve learned from other mentors in the space, but We we call it a a a qualified funding entity entity. Sorry. Okay? And so this entity It’s gonna be the entity that we kinda put on the shelf and we position it so it’s it’s it’s in a certain way. So that is the the the The entity that’s gonna, like, really get the most amount of credit lines and credit cards. And when you’re selecting the business type, that’s usually gonna be some kind of management company. There’s NAICS codes.
Jordan Berry [00:09:46]:
Those are like how businesses are identified. It wants to be some kind of management company or or something like that consulting. It doesn’t wanna be a, You know, real estate company or something that is risky. And so this qualified funding entity is gonna eventually build credit. And oftentimes, people get it wrong. They tell you you can go out and you can get you can build actual business credit, which is true. You can get gas cards and stuff that That they don’t do, they don’t pull your credit. They don’t you don’t personally guarantee it.
Jordan Berry [00:10:17]:
But that’s, like, the slow way. Usually, what happens is When you set up the entity the right way, you’re gonna go to Wells Fargo or bank. And when you go in there, when you open that A checking account, if you’re set up correctly, they’re gonna give you 10, 20, 30, 40, $50,000 from day 1. And so there’s there’s certain banks that are more liberal. So I think, you you know, there’s, like, Oompoc Bank and, you know, Citizens Bank. They could those banks We’ll do, like, an app only up to $100,000. So so knowing how to kinda play the game, but the qualified funding entity is really the entity that It’s gonna it’s gonna use this credit credit lines, and it it’s gonna invest and make loans to your other business entities, and then you repay it back. So that’s what that the purpose of that Funding entity will do.
Jordan Berry [00:11:08]:
So so the so, really, What happens is is when they when you apply for credit or or when you open an account and it triggers, there’s algorithms, And they they approve it, like, instantly, the credit the credit bureau, you know, companies. And then they determine how much Loan amount is. So, also, there’s things on your personal credit you wanna look for. Like, if you have name variations, you wanna fix all that. Like, because My legal name isn’t Beau. Beau is my middle name. So I might have Boakstein, but my legal name is Steven Boakstein. So you wanna get those variances Correct.
Jordan Berry [00:11:41]:
You wanna get your address correct. You don’t wanna have 50 addresses. You don’t wanna have 50, employers on your credit report. So your personal credit profile is the most important thing, making sure all those things are on point. But you see, like, starting with the end in mind because a A lot of business owners, what are they doing? They’re leveraging to the health. Right? That’s what they try to do. I’m working with 1 1 gentleman right now, and he’s buying a franchise. And he’s like, he’s he only has $30,000 to his name.
Jordan Berry [00:12:09]:
We’re gonna get him SBA financing, and they’re like he’s, like, completely trying to leverage. And he needs to have a backup plan because what happens when you go in business, there’s always unexpected cost. So you always wanna have this plan first, And then we go into, like now we can go into, like, okay. Now we’re looking at a laundromat to purchase, and it’s an existing business. So if you’re looking to get the highest leverage possible, we’re gonna use utilize SBA financing. You’re gonna if it’s if there’s no real estate, You’re gonna use definitely utilize the SBA seven a or the SBA Express, which they’re pretty much the same. There’s some differences, depending on the total loan amount. But on SBA loan, you can finance up to 90% of the purchase price.
Jordan Berry [00:12:51]:
You can build in working capital. You can build an employee salary for the 1st few months. You can build in, money for improvements and for more machines, Assuming that the the cash flow will debt service the exit the the new debt. Right? So it’s got a cash flow. However, that’s not always the case if you’re sometimes, I’m sure, Jordan, that you buy a mismanaged laundromat facility And that their their tax returns are not great. They run losses. They run personal expenses. That’s okay because We can do we can use 3 years of projections, and we can use that.
Jordan Berry [00:13:30]:
So s base 7 a loans could be projection based. Right? So Even if the cash flow is not there, we can still sometimes make deals. We can still oftentimes these mom and pop laundromats. And I’m not an expert like Jordan. I’m actually gotta take his courses so I can learn how to buy laundry mats. But from a lending standpoint, There’s always people always run their personal expenses through their business, and they do that because they pay less taxes. Well, Well, the problem is is when they go to sell, it’s very hard to finance. So oftentimes, you’re gonna see some seller financing, which is always the best option if you can get the seller to finance the deal.
Jordan Berry [00:14:06]:
It’s usually always the best option. But but there’s there’s ways to do it. You know, we talked about business plans, Jordan, and, you know, business plans are very important. I know that’s Everybody’s worried about the business plan, but but, really, it doesn’t have to be elaborate. It just it’s you’re gonna do 3 years of projections. We have a we have a Excel template that We give our borrowers they’re gonna break it down month to month for year 1, and then they do year 2 3. That’s usually what the SBA banks want. We’re gonna do a business plan.
Jordan Berry [00:14:40]:
That doesn’t have to be a 20 page business plan. It’s just like, hey. We’re taking over this business. This is what we’re gonna implement. They’re There’s they’re doing coins. We’re gonna implement new machines, but we’re gonna phase it out. This is our plan. That’s all you need.
Jordan Berry [00:14:52]:
A resume. No. My name is Beau. This is my background. Although I don’t have laundromat experience, I’ve been a, you know, a self employed broker. I have business savvy. I have all this. Like, that’s what your resume says.
Jordan Berry [00:15:05]:
So even if you don’t have laundromat experience, doesn’t mean you’re not gonna get the law. So, hopefully, that was a good little kind of overview of just the initial stuff. Now let’s dive into whatever you wanna questions you might ask and I can elaborate on.
Beau Eckstein [00:15:19]:
Yeah. Oh, I mean, I think that’s awesome because, that is one of the big concerns. I mean, going back to, you know, being able to utilize projections to qualify. You know, one of the biggest concerns is, you know, I I sort of half joke a lot. Like, a lot of my owners are either really, really bad at keeping the books. I mean, I’ve I’ve shared I’ve gotten p and l’s on napkins, literally handwritten on napkins, or we’re really good at keeping the books And maybe we have more than 1 book. Right? Or you know what I mean? And so, you know, when those books are messy, you know, obviously, banks are very risk averse And and all that. So, you know, trying to qualify, you know, for loans for laundromats can be tricky.
Beau Eckstein [00:16:02]:
So Like to hear that you can use, some projections sometimes to to qualify these existing laundromat purchases. Okay. So, You know, like you said, a lot of business owners, like to utilize as much leverage as possible, and are, You know, looking to have as little skin in the game as possible or they just don’t have like you said, you know, the guy you’re working with who’s got 30 k, who’s trying to, You know, NABR franchise, first of all, is that is that doable with 30 k?
Jordan Berry [00:16:36]:
Yeah. But, I mean, like a A Made Pro franchise is it’s about a 130,000 with working capital all in. So if you have 10% or 15% equity injection, yeah, you can do it. So, Look. There’s something for everybody, and maybe you can’t go out and buy a $2,000,000 laundromat on your 1st acquisition, but They’re stepping stones. Maybe you’re doing vending. Maybe you’re I mean, you gotta just build, really. You gotta build.
Jordan Berry [00:17:02]:
And so I remember when I worked out when I was living in the Bay Area and I worked out at, 24 Hour Fitness, and I would see this firefighter in there. And he I knew. We started Talking, and I didn’t realize he owned all these laundromats. And he I’m like, well, I don’t even realize why you’re still a firefighter, buddy. But he was just crushing it. He owned them a bunch of laundromats throughout the Bay Area. And it’s just like that’s when it was really kicked into me. I was, well, that’s you know, there’s a reason why so many people wanna buy These laundry mats and car washes, and and I see it firsthand.
Jordan Berry [00:17:33]:
I see the opportunities, you know, out there with with these businesses. So, you know, I have a laundromat I’m working on right now for a gentleman. And, I So what I do in the SBA equation, I should probably explain that. I’m a broker. I’m a consultant. So I work with I work with banks, credit unions, and nonbank SBA lenders. Yes. There’s nonbank SBA lenders.
Jordan Berry [00:17:59]:
We typically work with PLP lenders, meaning that they’re the direct lenders they underwrite in house. I do 7 a’s. I do five zero four. I do kind of alternative finance. I do a little bit of equipment financing. I do some real estate stuff too. It’s kind of my lending business. But but what I do is really I help structure and package the deal and then take it to the right bank.
Jordan Berry [00:18:20]:
I act as the quarterback in the beginning, And then once we get a term sheet, the processor from the bank takes over. And I I stay in the deal, but I’m kind of in the background. The best part, typically, on all SBA loans, I don’t even charge a fee because I get paid a referral fee from the bank. So it’s a free service value add. So I did I had a laundromat come come to me a couple months back, and he was buying the real estate and the business. And the lady was gonna carry the business portion of it, not the real estate. And so we wanna do it so we finally figured out how to structure it, which would be SBA eligible. And then and then, the 1st bank just that I brought it to Sometimes I have to bring it to 2 banks because, you know, stuff happens.
Jordan Berry [00:19:08]:
It’s not a it’s there’s no surefire way. Getting an SBA loan sometimes is it takes a lot of tenacity and but but at the end of the day, where can get where can you leverage Almost a 100% financing SBA. That’s why we do it. We have to sometimes we have to take punches to get through to the finish line. Let’s just think But it but, anyways, with that business, we took it to the 1st bank, and they could not they couldn’t get the DSCR correct. They’re like, hey. There’s too many write offs. But but really what it takes you gotta dive in.
Jordan Berry [00:19:40]:
So, 1, if you’re looking to buy, you have to you have to build a relationship with the seller even if there’s a broker involved because we’re gonna have to get in sometimes. We’re gonna go, hey. What about why are you running why are you running a car Your car payment through this like, when I it’s not really we’re not delivering anything. We don’t need a car for this business. So you’re gonna see there’s always gonna be add backs. And these co owner operated laundry, laundry facilities, let’s face it. It’s like tips when you’re a waiter. You’re not claiming all of it.
Jordan Berry [00:20:11]:
We we know that. So we just gotta get in there, and then cost of goods sold on this particular deal. There’s a huge amount of the the the cogs was not realistic, and so she She was building something in there to to write off. So we we got to the end end of the day, we found the bank, And we got on the phone, and we worked through it, and we got a we got a term sheet. Now we’re buying the real estate. So what do you have to do? As big guidelines, they’re gonna wanna phase 1. That’s an environmental. And, unfortunately, the neighbor had a contamination on their property.
Jordan Berry [00:20:48]:
So we went through all this. We had a ended ended up having to do a phase two, and now we just got clear that everything is good. So now we’re going to the closing on it. So it does take time. It takes resilience sometimes. So I’m not gonna, like, sugarcoat this and tell you it’s super easy now. They’re starting to streamline the smaller loans under five Thousand, the Express. They’re a little bit more streamlined, but there’s always gonna be hiccups, and it’s just working through.
Jordan Berry [00:21:14]:
And that’s why I’m here is because I I can help people navigate this. If you go to 1 bank, they could decline it, or they could say, hey. We’ll do this deal with 20% equity injection. You could take it to a different bank, and they say, okay. We’ll do this at 10% equity injection. It’s all over the gamut. Because at the end of the day, the banks still overlay the deal, and then we They still have to use we call it prudent lending lending. So we just find the most aggressive lenders with the best terms.
Jordan Berry [00:21:40]:
It’s kind of how I try to navigate To get the deal done.
Beau Eckstein [00:21:43]:
Yeah. And actually, what I mean, what I love about, utilizing services of, like, a a loan broker as opposed to going direct is that You do have that opportunity to sorta advocate for the deal and also can consult on that deal, right, in kinda in that process. And so it’s It’s almost like having a, you know, a teammate on your team as you’re going through this this process. And, you know, Like you said, it can be a little painful. And actually, it can be a little painful for the seller sometimes to, going through that process because they, a lot of times, need to provide a lot of documentation and, You know, there’s a lot of back and forth that can go on. Real quick, I wanna just just so everybody’s kinda on the same page, a couple of things that you, mentioned I just wanna get Clarity on just so we’re on the you know, everybody’s everybody’s up to speed. So you mentioned DSCR, which is debt service coverage ratio. Can you Briefly describe what that is.
Jordan Berry [00:22:40]:
Yeah. So, basically, they wanna make sure that the cash flow in place can more than pay for the the new debt that’s gonna be on there. Right? So they wanna make sure it can it could pay pay for it by a 115%. 115% is very low. Really, you wanna look for businesses that are the DSCRs are much better than that, but You can go as low as that with SBA financing. Now I will add, sometimes you’re gonna you’re gonna find an old dilapidated laundromat That is a value add. Right? There’s all some people buy turnkey. Some people probably do value add because you can that’s how you’re gonna get in when you’re starting, and then you can make more money on the upside.
Jordan Berry [00:23:20]:
So you can you can in your business plan, in your projections, you can say, hey. I’m changing out 20 machines, And that’s gonna reflect in our new projections because they’re better machines. You’re gonna charge more per load, yada yada yada. So you can do projection based. And so We would just we just wanna show why we’re gonna make more money because part of our total project cost is we’re buying these 20 new machines, And they’re gonna do x amount, and the revenue for this is x, and they’re they’re not going to operate anymore. You know, you pay with a card or, Yeah. So that’s building the story. So you can do deals that don’t debt service today is my point, and that’s how we would do them.
Beau Eckstein [00:24:01]:
Yeah. Okay. And then real quick, you mentioned COGS, cost of goods sold. Can you describe, or define, I guess, what COGS, cost of goods sold, is?
Jordan Berry [00:24:12]:
Yeah. So anything like on a laundry facility. Right? Like, if you’re it could be, you know, cleaning supplies that you’re using to clean the The facility, it could be, you know, people are putting in their you know, if they have staff, their their clothing for their their staff. They could There could be any anything that you lump in cost of goods sold. It could be I mean, most of the time, you’re thinking it’s gonna be laundry detergent and things like that. But The problem is is that cost of goods sold ends up being a lot of personal items usually with these mom and pop owned things. So, like, You know, there could be expenses that are a new computer that they’re not really using for the business, but they’re running it through the business. You see what I’m saying? So that’s where the problems arise.
Jordan Berry [00:24:59]:
So any onetime expense what we’re looking at is any onetime expense or any capital improvement, right, we can add that back into the the cash flow. So That’s the importance of having the relationship with the seller is is to really kinda get in and and understand the financials. Because on these tougher deals that you know you’re gonna make a lot of money When you take over operations, they’re usually the hardest ones to kind of get SBA financing for because you gotta you gotta weed through all this stuff that’s not been managed correctly.
Beau Eckstein [00:25:26]:
Yeah. Yeah. Awesome. Thank you. I appreciate you taking the time just so we’re on the same page. Okay. You mentioned it can be a little Painful. Go go through this process a little bit.
Beau Eckstein [00:25:38]:
Can we just talk about the process? Like, what kind of pain are we walking into here? What’s what’s, You know, if I’m I’m wanting to go and buy my 1st laundromat, how do I what’s the process I go through to to get an SBA loan? Sure.
Jordan Berry [00:25:53]:
So I I would say the initial part isn’t that painful at all. From you, we’re gonna get 3 years of tax returns. If you have any other businesses, we’re gonna get business tax returns for those other entities. If you have any other businesses, you’re gonna have, put together a debt schedule. But if you’re just a w two employee, you’re just 3 years of tax returns, form 413, which is a personal financial statement, Form 1919, which is kinda like a loan application, an SBA loan application, resume, And then business plan. And then from the seller, we need 3 years of tax returns and a year to date. That’s what we need initially. We that’s usually enough to get a term sheet.
Jordan Berry [00:26:37]:
Once we get the term sheet and you sign the term sheet, then typically the bank processor Takes over, and then there’s gonna be other you know, obviously, we’re gonna have to do inventory. You’re gonna have to make a list of the what inventory is there, the equipment, serial numbers on the equipment. Right? We’re gonna have, if there’s any accounts receivable, things like that, we have to get there’s forms for all of that. But once we get the term sheet, You sign it. It goes to the to processor. Processor then has a checklist. You’re working with a processor at the bank or the credit union. You’re going you’re going through that.
Jordan Berry [00:27:13]:
They’re doing, in the back in the back end, they’re doing, like, pulling tax transcripts and things from the IRS. Depends if if there’s real estate. We’re gonna do an appraisal. We’re gonna do a phase one. If there’s no real estate, we’re not gonna do that. There’s you’re You’re gonna have to get, a copy of the lease. The SBA the bank usually has a form they want the landlord to sign, things like that. But it it’s just a back and forth, and it’s a little bit of it’s a process.
Jordan Berry [00:27:39]:
Anytime you get a commercial or business type of loan, unless it’s a no doc loan, it’s a process. These things take a while to do. If it’s a small SBA Express, sometimes you can close these a little bit quicker than the the full seven a type of loans. So So they have small 7 a loans, SBA seven a loans. They have express loans, and then they have regular seven a loans. So you can have a total aggregate of $5,000,000 of SBA financing. Now some, We can talk about this later, but some people build their own facilities or buy their buildings, and they use another product called the SBA 504. And if you know about the SBA 504, you can do an there’s a it’s a first and second, so you can you can do, like, larger, much larger deals.
Jordan Berry [00:28:28]:
And so only the 2nd part is the SBA guaranteed piece. So you can have you can like, I can buy a $12,000,000,000 facility if I wanted to with an SBA loan. Senior debt is 50% of total project cost, and the SBA piece is 40%. You get 90% financing, Potentially. But that’s the five zero four. So going back to the process, Once all the processing documents are in, you get a loan commitment at this that time. And then Once it’s the loan commitment is in, you get assigned a a closer at the bank, and the closer then has more paperwork back and forth back and forth. And, you know, for example, right before I got on this call, I’m financing a, an acquisition of a painting company.
Jordan Berry [00:29:17]:
No real estate involved. And, the the bank pulled transcripts from the seller’s tax returns to make sure they were filed and they’re legitimate, and Their 2020 were wasn’t filed. So they had to go back and, like, why wasn’t this filed? Like, you know, somehow it didn’t get filed. And so It was a simple fix, but those are the kind of things that happen in between accounts receivable. There’s, you know, there’s documents for those kind of things that you have to get plea. But, I mean, it’s really not that hard. It’s just a longer process with these larger deals. If it’s a 2 or $300,000 deal, those are a little bit easier.
Jordan Berry [00:29:55]:
You can them under the express. There’s a lot of nonbank SBA lenders that do the express loans, and they’re more kind of quicker where you’re gonna get a faster response and and things move a little bit quicker. But, yeah, you if there’s no real estate involved, Figure around 60 days to close. If there’s real estate involved, it’s gonna be it could be 4 or 5 months. You just never know depending on Depending on the whole process and just how fast the seller gets you the documents you need, how fast the bank can move. Not all banks are some banks are faster than others, so it just really depends on the on the deal itself. But, that’s where communication is really is critical. It’s just that, you know, the seller wants to make sure the deal is gonna go through.
Jordan Berry [00:30:42]:
The buyer is nervous. The banker is trying to, like, be the middleman, and they’re Dealing with the underwriters. So it’s just it’s just a process. But what I really love about this, if you can find the right deal, you get 90% of total project cost, which includes working capital, all that stuff. It’s not just the purchase price. Alright? And then the other beautiful thing is is that you can get the seller to carry back 5% On full standby. If they carry about 5% on full standby, that’s like leaving 5% of their equity in the deal. They can’t make payments or maybe it’s interest only payments for the 1st 2 years.
Jordan Berry [00:31:15]:
It used to have to be for the Oh, life of the loan. Now it only has to be for 2 years. So now I only have to come in with 5%. So let’s just say it’s a $1,000,000, facility, it’s a building that you’re buying and and and the business, and it’s $1,000,000. So it’s 900,000, but with total project cost is $1,000,000. 90 per 900,000 comes from the bank, 5% on standby from the seller, so that’s all I need to come in was $50. Well, you know what? The beauty of it is is, like, hey. You know? I’m I just bought a short term rental.
Jordan Berry [00:31:51]:
I’m kinda broke right now, but this is a great deal. But I know Jordan has dry powder. Hey, Jordan. You’re experiencing this. You’re my mentor in laundry mat facilities. I’ll give you 15% if you come in with the $50 or a 10% of the deal. You don’t have to go on the loan. You know, you’re you’re providing equity.
Jordan Berry [00:32:10]:
It can’t be alone, but if you become you know, you’re part you you’re you own 15% of this entity. You can do that. So so I was just able to close with 0 out of pocket. You can do that all day long. Now granted, I have to have the borrowing characteristics. And what does that mean? I need, like, a 6 60 minimum credit score. If I have any derogatories, they need to be explained with letter explanation. I have to be a I have to be a US citizen or a permanent resident alien.
Jordan Berry [00:32:38]:
I can’t be on an e two visa here in the States. We have other programs for that, but it’s not gonna work for SBA. There are certain rules if you have any felonies in your past. Not to say you can’t get if If you’re on probation, things like that, there’s there’s certain rules there. BKs, you can have BKs in the past, but it’s gotta be what you know, Usually, like, 7 years or more. But if you have good credit and then the other thing too is they’re gonna look at global cash flow. So we don’t look at DTI like when you buy a house. They look at global cash flow.
Jordan Berry [00:33:16]:
So as long as you don’t have a lot of revolving debts, You know, like, oh, I have this, you know, Range Rover. I’m making a $1500 a month payment. I have a Mercedes. If you’re not over leveraged, then you should be fine, typically, but we will they will look at global cash flow. So those are the those are the considerations.
Beau Eckstein [00:33:38]:
What about, I mean, you mentioned, bankruptcies. What about business Bankruptcies in the past, is that gonna be the same kind of qualifications?
Jordan Berry [00:33:48]:
Yeah. Some banks say no. No. That’s just their rules. So, yeah, the guidelines for the so SBA comes out with an SOP, and we just had recent changes. Like, We’ve had a like, in May and August, there’s been tons of changes. So I also take classes through Nagel, which is National Association of Government Guaranteed Lenders. Listen.
Jordan Berry [00:34:07]:
There’s no other brokers, not many, I should say, that take these classes. But I’m like, man, I wanna learn in this business because it’s it’s complicated. But there’s there’s, like, The stack of this the SOP is just crazy, and, like, they update stuff and, but for business bankruptcy, it’s probably a 7 year look back, I would say, that they they wouldn’t wanna see it. I’d have to check the guidelines to see what the actual, you know, circumstances around that. I mean, SBA lending is make sense lending. Now I wanna add something here too. If there if there’s a collateral shortfall So here’s the caveat with SBA that I want I always want people to be aware of. You know? I’m gonna use myself.
Jordan Berry [00:34:53]:
I own a couple of houses, primary rental properties. I’m a 100% owner of these houses, or my business entities are a 100% owner of these houses. I’m going out, and I buy this $1,000,000 or let’s just say it’s $800,000. It’s there’s no real estate. It’s just the machines and the business that I’m buying. And that they’re only gonna give you so, basically, I’m getting a loan for $1,000,000, and the value of the collateral is maybe 50,000 because they’re gonna use 30% of the value of the machines. So there’s a collateral shortfall. SBA guidelines say if there’s a collateral shortfall, they’re gonna look for additional collateral.
Jordan Berry [00:35:30]:
So if you have additional collateral, they’re gonna put a 2nd lien on it until they make up for that collateral shortfall. If you don’t have, any other any real estate? They could still do the loan. So I’m just letting you know that you’re if you own real estate, just be aware. So what does that mean? Before you ever apply for a loan, maybe a pull out a big equity line. You can just I’m not telling you that, but I’m telling you that. Just be aware that Now some banks and here’s the other thing. Some banks only wanna do SBA deals with CRE, with Commercial real estate because it’s collateralized. Some banks will do when there’s a we call it a big air ball.
Jordan Berry [00:36:10]:
There’s no it’s all blue sky. It’s intangible. It’s you’re just buying the business The value of the business. Right? There’s no there’s no collateral, essentially. Because even if you think, oh, well, it’s got $200,000 of machines, well, really, they’re gonna use fire sale value, and that’s, like, Fifty grand. So just realize you’re gonna have a collateral shortfall, and they will look for additional collateral. And if you don’t have additional collateral, doesn’t mean you’re not gonna get approved. We just gotta find the right bank that doesn’t mind because they’re they’re saying, who cares? Because this thing’s spinning off $200,000 a year in in in net cash flow.
Beau Eckstein [00:36:43]:
So Yeah. Yeah. I mean, I think that’s an awesome tip because, you know, a lot of people who are trying to get into the business or whatever are gonna have other assets, you know, whether it’s real estate or other businesses or whatever. And so having that equity in there is obviously that’s a good thing to have equity in your assets except for if it they’re gonna try to tie them altogether. So that’s a that’s an awesome tip. There, are there things I mean, you’ve kinda already mentioned all the thing. I just wanna make sure we kinda cover all the bases. Are there things let’s say I wanna do an SBA loan.
Beau Eckstein [00:37:17]:
I’m getting excited about the things you’re saying because I am getting excited about things you’re saying. Let’s say I wanna do an SBA loan. Aside from sorta getting my credit, you know, kinda in line, maybe pulling out some lines of credit on other assets, stuff like that, Anything else we should be doing to make sure that we’re gonna qualify for an SBA loan?
Jordan Berry [00:37:38]:
Not really. I mean, it’s just really getting A lot of people come to me with, like, the p and l’s and, like, here here’s the p and l’s from the business of mine. I’m like, just get the tax returns because, like, the p and l’s Sometimes don’t represent the actuals, and and SBA guidance are gonna require 3 years of tax returns if it’s if it if you’re if it’s an existing business. I don’t know if any any of your viewers ever do start ups, but we can do start up financing too. We can finance up to well, the SBA guidelines say you can do a 100% financing. But but, really, we can typically, prudent lending is gonna allow for 90% on the high leverage of total project cost for a start up. That’s pretty good. Some banks may say, hey.
Jordan Berry [00:38:16]:
We’re only comfortable doing 80 or 85, but some banks will do 90 of total project cost on start ups. So So if you’re starting from from the from the ground up, there’s nothing that you really have to prepare for. I would say, like, you know, what I do oftentimes is people schedule a call, and I’ll send the initial documents. I sent them the form 413. So they I say you just get it ready and fill it out and don’t date it and sign it. So when you’re ready, you’re not like, oh, I gotta do a debt schedule. I gotta do a 413. I gotta do a resume.
Jordan Berry [00:38:41]:
I gotta do a you know? And then from a business plan’s perspective, yeah, maybe we get them some templates so they could say, here here’s here’s an example. But, really, The business plan doesn’t need to be elaborate. It just need if it’s, like, some random business, like, I’m starting at some venue, and it’s gonna have, You know, a vineyard, and I’m gonna do, you know, weddings, and that requires a more in-depth business plan. But laundry mats, it’s really, You know, who’s in the market? Who’s my competition? Who’s close? How many machines? Is this wash am I just doing laundry? Am I doing wash and fold? Am I gonna do delivery? How can I value add? Is it coin operated? Is it actually, you know, digitized now? That’s really what they want, so it’s not that complicated. I wouldn’t get overwhelmed with that part. It’s really if you’re buying existing business and you have a and especially if you get a home run business where it’s just like strong cash flow, Those are the easiest deals because it’s like the the seller is just getting old, and they’re like, we wanna sell. But they’re very meticulous with their books And they’re strong cash flow, and they’re gonna sell they’re gonna carry back a little bit. That makes the deal so sweet.
Jordan Berry [00:39:46]:
So always look for seller financing And oftentimes say, like, look. You’re gonna get killed on taxes. Why don’t we do it some sort of installment? At least keep you know? I’ll get I’ll get 80% financing from the bank. You you finance, you know, 15%. I’ll come in with 5. And then you give them a little bit of a tax break. So now, Jordan, there’s another really cool thing. Before, if you were using SBA financing So let’s just say Jordan had a good starter laundry mat that he’s he’s done with.
Jordan Berry [00:40:20]:
He’s like, alright. I’m moving on to bigger pastures. I So I got 30 machines. I only do a 100 machines of more. Whatever. I could say, hey, Jordan. I’m I wanna buy into your business. So before, Jordan would have to sell a 100%, but now Jordan could stay in.
Jordan Berry [00:40:37]:
So that’s so now you can do partial buyouts now. You couldn’t do that before. That’s a new guideline change.
Beau Eckstein [00:40:43]:
That’s an awesome So kinda tool to have in the tool belt To, you know, as yeah. Right now, like, finding laundromat deals is tough right now. There’s just not as much on the market as We’re used to seeing, and so we’re having to be a little more creative with a lot of deals. So that’s a really good tool to have in the tool belt, you know, especially if there’s an owner who’s, You know, interested in selling, but also, you know, kinda feeling like maybe I don’t wanna sell. I don’t know. And there’s, you know, having that tool and say, okay. Well, let’s, You know, let’s look to see if this makes sense for you and for me, is awesome. I didn’t even know that.
Jordan Berry [00:41:19]:
Yeah. And and it also could be Strategic. They could get a little bit of windfall off capital now. They could stay in as 50 or 60% owner or 40% owner. They still get I thought when the rule came out that they they could take, like, a 19% ownership and then not have to be a guarantor, but it’s not the case. SBA will look back 6 months. So you can’t do it that way, but you could strategically, like, sell a portion, bring in a new buyer operator, stay in the deal, Only get taxed a little bit and then get and then still get cash flow and have them kinda run the day to day. So I think you’re gonna see more creativity that way coming coming through over the next couple years.
Beau Eckstein [00:41:54]:
Yeah. I love that. Any other any other changes that you’re seeing in SBA, loan?
Jordan Berry [00:42:02]:
No. SBA is pushing to do more, smaller loans. So anything sub 500, they’re love they’re pushing, the banks to do. They want Really, it’s you know, these programs are for Americans to, you know, become self employed and to Grow the world and economy and to create a better life for everybody. So, like, if you’re able to take advantage of this type of loan no. Not everybody can. Like, My financials are I run a lot of losses. I have a lot of entities.
Jordan Berry [00:42:29]:
It’s very difficult for me to get SBA financing. So, you know, Some people that have lots of losses on paper, and it’s gonna be hard to add back other than the depreciation. And You’re gonna that’s gonna be a little bit harder sell than somebody that’s, you know, maybe just getting started. It’s almost easier because you just say, hey. I got I’m w two to make a $120 a year as a Software sales guy, and I own a house. And, like, that’s super easy. Right? There’s not a lot of moving parts versus, like, I have 1 guy right now, And he’s got, like, 23 affiliates. Now they just changed the rule, but I in the past, I would have to provide 23 tax returns for each of the year because he’s owns a 100 some of those businesses.
Jordan Berry [00:43:11]:
So, you know, just amount of paperwork. But, yeah, you know, if you’re not that complicated, it it almost makes it easier. But But at the end of the day, it’s it’s a great process. If you’re not here’s another tip I was thinking about earlier that I didn’t say. So oftentimes, let’s just say you’re buying a mom and pop and it’s completely run to crap. You can the sellers wanna carry back 50%. You can go get a short term loan, like a hard money loan, you know, with a 2 year note. As long as it’s got a bloom payment, you could you could refinance with SBA too.
Jordan Berry [00:43:46]:
So that’s another way to come in and with with the value add play. So you take it over. You now have a balloon, but now you get the books running right. You got everything clean, then you refinance with the seven a. So the you could do that too.
Beau Eckstein [00:43:59]:
If you’re planning to refinance, is 2 years a good time period? Do you need a little more? Is what’s What should I be shooting for?
Jordan Berry [00:44:07]:
No. I mean, we could do it we could do it in 12 months, I think. I think it just you know, like, if the deal makes sense, you can get it done. As long as the the debt is eligible to re be refinanced, meaning, like, if you have a balloon on a on a loan, then it’s eligible because there’s, so, really, before, the SBA guidelines said, like, You know, if you’re able if you have, like, $2,000,000 in the bank and you’re borrowing 500,000, they would say no. Like, you could go get a conventional loan. So they now they got rid of that rule to a certain degree. Because they didn’t wanna they they didn’t want they want they wanted to make loans to people that couldn’t normally get it. Like, I can’t go out and get 90 some financing from a bank on a on a a business with no collateral, like but SBA does.
Jordan Berry [00:44:55]:
Like, a normal bank would probably be at, like, 50 Percent LTV loan to cost. Right? They’re not they’re not stupid. Now the reason the banks are willing to make the risk is because they’re getting guarantee from the government. So they’re getting a guarantee from anywhere from, like, say, 60 to 85% depending on the type of loan and the size of the loan. So So that’s why these banks are like, okay. Well, if we underwrite the deal correctly and use prudent lending, we got a guarantee of this loan. And on the 7 a loans, they sell off the guaranteed piece, most of the banks, so they make a ton of money. So that’s why these banks love doing 7 a’s versus not as many of them like to do the 5 o fours because they make more money on the 7 a’s.
Jordan Berry [00:45:34]:
But if you learn the game of money, Then, you know, like, if you really think about it, you could go out and buy a $1,000,000 business with $50. Like, that’s spinning off 2 or $300 a year in cash flow. You just Quit your you know, replace your income. I was talking to a guy yesterday, and he was like, yeah. I’ve been buying real estate. And then I I I was started listening to Cody Sanchez. And and this guy was a Navy SEAL, and he he went to SEAL school with, I guess, Cody Sanchez’s husband. He was a seal is a seal.
Jordan Berry [00:46:06]:
And so she was like, yeah. Just makes sense. And he’s like, I got about $300. How much can I qualify for? I’m like, well, it’s not really like that. But in theory, yeah, you can go out and buy a $3,000,000 This is right. You got 10% down. You need you need 6 to 8 months of post close liquidity of reserves typically. Well, listen.
Jordan Berry [00:46:23]:
So he was he could go buy a $3,000,000 business. Right? Maybe he gets a salary, carry back 5%, and he comes in with a 150 left in dry powder. He now takes over. Now there’s already a manager in place, but these SBA loans have to be for Owner occupied bit or owner user businesses. It can’t be like people are gonna get calls. Can I go buy multifamily? No. Can I buy self storage? Yes. Because that’s considered a business.
Jordan Berry [00:46:50]:
In 2010, they they said that they made the rule that, yeah, well, you can do self storage. That’s when they did so now self storage is a huge industry. Car washes, things like that, SBA eligible. Grocery stores, start up businesses, wholesale businesses. We even have cap lines. So they have a program for home builders. They can get lines of credit from SBA to build houses. So it’s pretty cool.
Beau Eckstein [00:47:13]:
Yeah. That is awesome. And, I mean, the SBA Option just opens up so many doors for the right person who’s trying to get into the right business. Right? And, obviously, we’re talking Laundromat’s here, but a lot of laundromat owners, you know, another thing that they find is that they buy these laundromats and they have Excess cash. Right? Because they’re either they’re still working their 9 to 5, and they’re just kinda stockpiling their laundromat cash flow, or their cash flow just exceeds what they What they need. And so, you know, building up, you know, some of that extra kinda capital and being able to redeploy it, You know, either through purchasing more laundromats or building another business. I mean, we just see that happen so much. So, yes, for getting into the laundromat Industry in buying laundromats, but also, you know, you you kinda get that entrepreneur bug sometimes.
Beau Eckstein [00:48:06]:
Right? You have a business. It’s working. You’re kinda understanding it, and you’re itching to try something else. We you know, entrepreneurs are pretty notorious for that shiny object syndrome. So
Jordan Berry [00:48:16]:
Yeah. Or or you see, like, Large operators that run short term rentals. And then I I just was listening to somebody, and he’s like, yeah. We were doing so much laundry that we bought a laundromat. Right? So you just start thinking, like, what can you vertically integrate in your operations that make the most sense? And and the nice thing about laundry mats too is Every time you buy the equipment under they fall under 1 section 179, so you could be very strategic for taxes too. So I like businesses like that. Like, okay. I’m gonna replace the this much equipment this year.
Jordan Berry [00:48:46]:
So they give you the that write off. And every if you grow, if you can scale too, you can just have you can almost, You know, offset all your income by buying more more equipment and expanding. Right? And so, like, it’s a never ending battle.
Beau Eckstein [00:48:58]:
Yeah. That’s pretty much what I’ve done is I’ve Tried to make at least 1 major purchase a year, and it essentially went through the depreciation and all the other kinda tax benefits. It’s offsetting the majority of my income pretty much every year, there.
Jordan Berry [00:49:14]:
Do you own any of the real estate with the laundromats or mostly just the laundromats?
Beau Eckstein [00:49:17]:
I do own some real with the laundromats also.
Jordan Berry [00:49:20]:
Yeah. Because then you have the cost segregation on top that you could do. Right? Like
Beau Eckstein [00:49:26]:
What can you talk about that?
Jordan Berry [00:49:26]:
It just opens up what it
Beau Eckstein [00:49:28]:
Cost sec I mean, that’s that’s huge in our circle. Right? Like, in in GoBunance, we’re talking about cost segregation nonstop. I’m almost sick of hearing about it, but it’s so powerful. Right? Can you explain a little bit what that is?
Jordan Berry [00:49:38]:
Yeah. There’s certain components of your real estate that you can so on a on a on a you know, if you buy a multifamily building, you can Typically, you’d appreciate over 27 and a half years. If it’s a commercial building, I think it’s 29 and a half years. But, anyways, there are certain components that if you do a cost Segregation study. There we have a tax code that allows you to do acceleration of that depreciation, and we have a a bonus depreciation. And so, basically, you can depreciate certain components. And you can, like, go to a cost segregation company, then you can give them, hey. I bought property, and this is what a you know, this is what the information they go.
Jordan Berry [00:50:18]:
Oh, yeah. This is how much your this is how much your write off’s gonna be. So, like, for example, I had a guy, And he bought a he bought a building. We did SBA 504 financing for. He’s opening, he opened a Car dealership where he sells just only electric vehicles resale. And he’s like, hey. I’m looking for more cash flow. And I go, hey, dude.
Jordan Berry [00:50:39]:
You know? Here. Go fill this form out. And and and he essentially had $300,000 roughly of depreciation. And he hasn’t yet paid his 2022 taxes. I go, are you do you have a tax consequence? He’s like, yeah. Probably. So he basically has 300 like, if he owed $200, He could just not pay that because he’s he’s accelerating depreciation of that property. So So, like, that’s a huge you you do have to recapture down the road, but it doesn’t matter because you end up 10:31 exchanging it or doing something.
Jordan Berry [00:51:12]:
So you just kick it down the tire until you’re dead, and then it doesn’t matter when you’re dead. So when you’re looking at strategies, It’s not how much money you make, but it’s how much money you keep. Right? Like, I I talk about, my rich brother. Him and my rich brother is really smart. Right? And he’s got a lot of money, but he could have he could have 10 times more money. He’s w two, you know, pays probably $300,000 a year in taxes. Right? Like, you know, I look at my other, he’s he works w two in in the financial service world, and he’s super smart, yada yada yada, but, Like, he does not understand any of these strategies. Like, what he could be doing is he could be buying laundromat.
Jordan Berry [00:51:53]:
He could be buying short, self, Short term rentals. Right? Because if you materially participate in running a short term rental, you may be able to do cost segregation on that. Right. I’m not a tax accountant or a CPA, but I’m just telling you, like, there’s ways that you can play within the tax code that encourage us to be entrepreneurs. So everybody gets mad when they go, well, how does this guy not pay taxes? He makes millions of because they play in the tax code, and you can too, us, You know, us up and coming entrepreneurs of the world, you have you can be doing the same thing. You have you’re making $200 a year on your w two, you’re doing well. Time you paid taxes, though, you’re getting crushed. Well, that’s $50 that you paid in this year.
Jordan Berry [00:52:34]:
What if you went and bought a a building with a laundromat and you did cost segregation Or you have a lot of short term rental property. Like, you can be applying all these, tips and tricks and And pay less in taxes. And then, you know, I always look at that, like, whenever I’m having a taxable consequence and I know it, I’m, like, planning ahead. I’m like, okay. Well, what can I invest in That will offset some of this? That could be education. I’m investing, you know, in the best business in the world. My education. Right? It could be like, You know, we’re in Masterminds.
Jordan Berry [00:53:04]:
We pay a couple $1,000 or more than a couple $1,000 a year. Right? These are write offs. But, well, you know, is there anything I could buy? Maybe it’s. Here’s another thing. Well, what if you own a laundromat and you wanted to buy you put a vending machine in there, and that vending machine now does, you know, $1,000 a month in revenue. Like and then you also can use section 1.79 because you just spent $10 on that vending machine. And then, like, there’s all these things that you can build on that I think We we often overlook. And then also, you can also, you know, if you have employees, there’s WOTC tax credits.
Jordan Berry [00:53:38]:
There’s all these things that people don’t know. So if you have employees, you can get up to 2 to between $2,900 per employee, with the WOTC tax credit. People don’t know this. So cost segregation’s huge. Section 179 is huge. And and, like, listen. I don’t know that much about taxes, but I When I hear these things and I listen to podcasts and I pick up on these and I go I remember my friend a couple years ago, so I made $4,400,000 this year. He goes, I didn’t pay any taxes.
Jordan Berry [00:54:08]:
I had $5,400,000. He buys multifamily properties. Right? He paid no tax, and he just grows his wealth exponentially. It’s crazy.
Beau Eckstein [00:54:16]:
Well and, I mean, listen. I I talked to a lot of people. You’re like, it’s hard to get excited about taxes, but, like, That’s exciting. Right? Because you can go out and buy, you know, an asset and get excited about an 8%, 10%, Even, like, laundromat 20, 25% return on your money. But when you play the tax code right, you’re You’re making 30, 40, 50% return on that effort that you’re doing there when you’re saving money on the tax. So, I mean, it pays off huge to, like, you put it, like, play in the tax code. Right? And and look for these tax savings because the returns on that are Gigantic. Right? Not just in the money that you keep in your pocket, but all of that compounds, you know, over time.
Beau Eckstein [00:55:03]:
Because if your buddy’s, You know, making $5,000,000 in a year, and he ends up not paying taxes. He’s keeping the majority of that money and able to reinvest it. How much faster is that gonna grow Then if he had to pay half a debt in taxes, and he’s got 2 and a half million. Right? Like, still nothing to complain about, but good grief, man. You’re you’re talking Significant growth, significantly faster.
Jordan Berry [00:55:27]:
Yeah. It’s weird that I got I didn’t go to college, but I started studying all this stuff. And it’s just like, This stuff excited me because I’m like, who would think that taxes are exciting? Because they are pretty boring, but when you learn about, like, what you can do and, like, How the really wealthy people navigate, that’s where it just you know, you get you can get ahead and, like, how you can navigate getting Almost a 100% financing. All these things are the things that you do in your life that will change your life, and that’s the most important. Like, that You know, we talk about, like, buying houses, even like owning an owner occupied house. You get 250,000 or $500,000 tax exemption. You can move every 2 years and take that exemption. You know, you could 10.31 exchange.
Jordan Berry [00:56:09]:
A lot of people don’t know this. You can 10.31 exchange. Let’s just say I have a property in Indiana. I exchange it for a property here in Las Vegas. I keep it as a rental for a certain amount of years. I then move into it. I then can qualify for the exemptions. Right? So you can you can squash almost about everything if you play the game, and that’s what I really love.
Jordan Berry [00:56:28]:
I’m like, okay. Like, I don’t even need to make that much money to become because you you could have somebody that’s making $500 a year that’s w two’d, has no write offs, And it has a very you know, they they they rent an apartment, $6 a month. They drive and ask whatever, $2,000 a month. Right? And then the end of the day, you know, you’re thinking, how do you have not no money at $500,000 a year? But there’s a lot of people that live that way versus that 1 person that made $100 a year But made these strategic investments into that laundry mats and, like, you know, you just make that first investment, and then you just keep going and going and going. Then you have like you were saying, you get more cash flow, and then Then you’re like, okay. Well, I’m now a 100% er. I have more cash. I have passive cash flow coming in.
Jordan Berry [00:57:12]:
I then I you can reinvest that into other assets. So I think that’s the mindset we all need to really kinda just kinda grow slowly but surely. You’re just 1 laundromat away.
Beau Eckstein [00:57:25]:
I love that. You’re just 1 laundromat away. Yeah. Absolutely. And, you know, here’s the thing. Like, I I don’t want us to get caught up on okay. Well, he’s talking about his buddy who made 4 or $5,000,000 or who’s got a w two that’s making 2, $400,000 a year, whatever. This These things play kinda no matter where you’re at if you play them right.
Beau Eckstein [00:57:46]:
Like, you don’t even have to make $100,000 a year to take advantage of a lot of This stuff. Right? And so, you know, it’s it’s worth your time to be, you know, number 1, kinda doing your own homework on, you know, How how wealthy people utilize the tax code? Because you can utilize many of the same things if you’re making 60, 70, $80,000 a year you can utilize this stuff still, to help offset, you know, tax burden. So that’s number 1. And then number 2, When you get to that point where you’re starting to accumulate some assets, it’s just worth it to hire somebody who knows, who likes playing in the tax code. Like, You know, it’s not gonna be me who is going to be reading through all the tax documents and figuring out, you know, all the little ways to maximize your tax savings and all that. But there are people who love doing that. Right? And finding the best people you can to help you, play in the tax code, they’re obviously legally and all that stuff. You know, it it just pays off and it compounds kinda exponentially.
Beau Eckstein [00:58:53]:
So like you said, you don’t have to be making crazy amounts of money to take advantage of this stuff. You know, this this can work for you. And especially if you already own laundromats, there are a lot of things that we can do as laundromat owners to minimize our tax burden. So definitely Definitely worth it. I don’t know how we started talking about taxes from SBA loans, but we’re just hitting all the exciting topics today. Lending, Taxes, all of it. What else should we talk about, boring wise? Make it exciting.
Jordan Berry [00:59:23]:
Yeah. No. I I’m just no. I I I just get interested in all of this because this is all about, like, Entrepreneurship. Like, a lot of people think like, oh, I gotta make how much money you make, but it’s really the full picture. It’s really about planning because it’s making, like, those strategic moves. When I look at the 1st house I bought in San Ramon, California, I bought it on a lease option because I couldn’t get a loan at the time. I set the price, and then A year later, I exercised the option to buy it.
Jordan Berry [00:59:49]:
And I look at, like, I just that that property I bought at 325 is now worth 1,003. I don’t own it anymore, but I always go back and say, why did I ever sell that property? I never needed to. I could’ve it could’ve been a rental cash flow. Right? And so, like, You just to you know, getting in the game is so important, like, the mindset. Like, people probably watch your show or listen to your podcast, like, every episode. But, like, the people that will actually take action to to actually, you know, go out there and find these deals. Right? Because, Sure. You can pull a list online of laundromats, but probably the best way to do it is to find these kind of mom and pop off market deals and buy them, I guess, is my guess because I mean, I know there’s a lot of brokers that specialize in it, but would you say that because you’re you you’re a commercial broker.
Jordan Berry [01:00:37]:
Beau Eckstein [01:00:38]:
Yeah. No. But, I mean, I definitely think the biggest opportunities are either coming from pocket listings, which there’s not as many of us there used to be. And pocket listings is where our broker has a deal that they know is available, but it’s not listed anywhere yet. Or And and more commonly now is through going out and finding your own deal, through, you know, something like direct mail marketing or like a door knocking where you’re You’re going to meet owners and and ask them about their laundromat, ask them if they’re interested in selling. Those off market deals are for sure the way, to find the best deals, you know, out there. And and a lot of times the best terms too, if you Talk about, like, seller financing or, you know, things like that. Sometimes, you know, brokers have deals that sellers will offer the seller financing option, but a lot of times you go find those deals yourself.
Jordan Berry [01:01:35]:
And what about starting from the scratch? I mean, obviously, that’s a way Slower process to get to recoup your cash flow. But have you ever thought about doing you know, starting from scratch?
Beau Eckstein [01:01:46]:
Oh, yeah. Yeah. For sure. I mean, I think a a lot of people still build. There’s a lot to consider. Obviously, like you said, there’s it’s a it’s a slower play to, you know, To to get to that breakeven point and then to start cash flowing. Obviously, the build out is takes time, Takes a lot of capital to get going. A lot of times you can buy cheaper than you can build, but that’s not always the case.
Beau Eckstein [01:02:09]:
And that’s not always the best option. You know, but if you find a great location, where the demographics are right, the competition is right, and, and you’ve got you’ve got the space, then it can be a great option to build out for sure. And I’m assuming you can SBA finance build out. Is that true?
Jordan Berry [01:02:29]:
Beau Eckstein [01:02:31]:
So yeah. For sure.
Jordan Berry [01:02:32]:
Is there any is there any, successful franchise Concepts in the space that you ever have seen?
Beau Eckstein [01:02:39]:
There have been many attempts. There are a couple franchises right now that are Gaining some ground, so we’ll see how they play out. I think it’s too soon to tell. I I would say that every attempt, You know, thus far has not been successful, in the industry. But there are a couple of interesting Franchises right now in the laundromat space. So we’ll see, we’ll see how it plays out. Some were trying to make some big moves. So I know one, Just came on the podcast a few episodes ago, Laundry Lab, and they had just made a big acquisition of a, a pickup and delivery company called the Fold.
Beau Eckstein [01:03:22]:
And, you know, they’re trying to make some big moves, and their goal is to, you know, Be the nationwide brand, especially for pickup and delivery, but utilizing their franchise, you know, self serve stores as the the base points for their pickup and delivery. So there’s some interesting things happening right now, so we’ll see how it all plays out.
Jordan Berry [01:03:43]:
Do you have do do is wash and fold service is that something you have in every monument of yours typically?
Beau Eckstein [01:03:51]:
No. I mean, I’d say probably the majority or at least probably half. I don’t know the exact number, but of of laundromats Don’t have that. They’re self serve only, either fully attended or unattended, but no no service side to the business. Because that’s what that’s what adding a drop off laundry or pick up and delivery does. It introduces the service side of the industry. Otherwise, it’s it’s self-service, and so it does change up the business model a little bit.
Jordan Berry [01:04:20]:
Yeah. It’ll be interesting to see how technology plays a part of this because, you know, there’s gonna be some disruption to a certain degree. I mean, one thing is we know people, This is almost like water. People need to wash your clothes at some point. Right? I get and so there’s so many people that our apartment lifetime renters that don’t have laundry facilities. So then it’s like, okay. Well, They could still do laundry maybe in their apartment complex, but people hate doing laundry. So you’re gonna just, like like, I remember when I lived in an apartment after I sold a house, I was I was doing places.
Jordan Berry [01:04:55]:
I didn’t have laundry, and I hated going and doing laundry. I just you know, I liked it. It was just didn’t have the time. So would I pay? And I so what I do is I I drop off and did the, wash and fold.
Beau Eckstein [01:05:07]:
Yeah. Yeah. And
Jordan Berry [01:05:09]:
So it’s interesting.
Beau Eckstein [01:05:09]:
Yeah. That’s why the business is definitely growing, especially the pickup and delivery, but also the drop off, laundry. Both, I think, are are growing. And I’m seeing a trend towards new laundromats coming in that are larger and that are more full service Laundry centers, right, where you can come do your own laundry, or we’ll do it for you, or we’ll come pick it up and then do it for you. I definitely see a trend moving That way, for sure. And technology is playing a huge role, which it hadn’t played a huge role for a very long time. We were pretty stagnant, technologically speaking. And Now we’re finally starting to make some strides to, I think, catch up to modern day technology.
Beau Eckstein [01:05:50]:
We’re not really on the forefront of anything yet, but, we’re we’re catching up. It’s exciting to see.
Jordan Berry [01:05:57]:
Yeah. It’s Yeah. Very interesting stuff. I I I am I I am definitely interested in owning a laundromat, but, I have a lot to learn. So I have to, like Yeah. Watch your podcast. Go through your training courses because, like anything, there’s a learning curve.
Beau Eckstein [01:06:13]:
Yeah. And and it pays to shorten that learning curve. Right? Whether that’s Taking a course or, you know, getting a mentor or whatever it is, like, shorten that learning curve as much as you can, You know, because time time is money, man. Time is money. So, Boat, this has been awesome. So much, like, good good solid information. Like I I said this is one of the most talked about subjects, especially when I’m doing the webinars on how to buy a laundromat. SBA loans come up every single time I do a webinar, and So this information is just gold.
Beau Eckstein [01:06:47]:
So if people have more questions about SBA lending, maybe they need to talk to you a little bit more about their situation or interested in getting SBA loan. What’s the best way they can get in contact with you?
Jordan Berry [01:07:00]:
They can go to book with bow.com. Book, and and you can get it on my calendar. It’s a it goes to my Calendly link, book with Beau, beau.com. And then make sure you mention that, you heard me on Jordan’s podcast too, please. I always wanna know Yeah. Where you found me.
Beau Eckstein [01:07:18]:
Make me make me look good people. Make me look good. Yeah.
Jordan Berry [01:07:21]:
Beau Eckstein [01:07:21]:
So yeah. No. This has been awesome. I’m sure there’ll be people reaching out to you for sure because, like I said, this is a Super common question, and it’s something that, you know, it it solves one of the biggest problems potentially in Getting into this business, which is high capital needs upfront. Right? And if you can get in, you know, 80, 90, 95%, Leverage, I mean, I think it just makes it more accessible to more people sooner than they, you You know, normally anticipated if they’re trying to come up with 40 or, you know, or more percent down, you know, for some of these businesses.
Jordan Berry [01:07:59]:
And you know what’s crazy too if you really think about it. You literally Could go and with buy them with 1 acquisition, you could replace your your job, your w two job. Like, you could easily do that because I see how much cash flow the right Laundry mats due. Like, 1 acquisition, $50 out of pocket because you’re buying a $1,000,000 business. Let’s go see. Right? And you’re getting the salary care a little bit. $50. That can come from it could be a gift from your family member.
Jordan Berry [01:08:28]:
Like, if you really break it down that ease that way, really, you need to learn the fundamentals of how to buy these and run these businesses. Right? You need to learn this. You take the course, you get a mentor, and then you spend the next 6 months looking at deals every single day, You know? And then you line up the SBA finance and understand the process. It’s like $50. You just replace your w two job. And but I wouldn’t say quit right away. Keep the w two job, stack another $100 of of capital, and buy 1 more. And now you run 2 Pretty close to each other.
Jordan Berry [01:09:05]:
So and and you just now you you have enough cash flow to reinvest and buy real estate and just Turbocharge. Great. Passive income.
Beau Eckstein [01:09:14]:
Turbocharge. Yeah. I love that. $50 to buy your freedom. That is gonna be the name of this episode for sure, because I love that. And, You know? And that’s and that’s why I I talk to people. So I I would consider myself first a real estate investor and then 2nd long term asset, actually. However, You know, what I tell people is, like, look, if you’re trying to exit your w two, if you are trying to buy your fine or, you know, get achieve financial freedom, You know, there’s really not too many better ways than buying something like a laundromat to do that.
Beau Eckstein [01:09:48]:
And, you know, I I learned about the concept through real estate investing Until I started to, like, sit down and think, and I’m like, man, I have to have how many doors to replace my income, to buy my freedom? Like, that’s a lot of real estate. Whereas, like you said, 1, maybe 2 laundromats, and you are, You know, free to do what you want with your time. So I love that. And you are the guy to help us Get there. So I appreciate you coming on, sharing your knowledge, your wisdom, dropping those bombs, making yourself available, book with bow.com. That link will In the show notes are free on YouTube. Those will be down below. So on your way down to click that link, hit the subscribe button, and then go click that link and book with Beau.
Beau Eckstein [01:10:33]:
And then make me look good and let them know you heard about them from me. Beau, you are the man. Appreciate you coming on. Thanks so much. And, hopefully, you’ll be chatting with a whole bunch of future laundromat empire builders.
Jordan Berry [01:10:47]:
Alright. Thanks for having me. It was fun.
Beau Eckstein [01:10:49]:
Likewise. Alright. I hope you loved that episode with Beau. Man, in today’s market where financing is just So difficult right now. Interest rates are high. Down payment requirements are high. Laundromat prices are high. Equipment prices are high.
Beau Eckstein [01:11:07]:
Everything is high right now. Utility costs, they’re high. Everything is high. Right? Hopefully, this SBA option It’s gonna help some of you get into this business or expand your empire, here and help you grow that out. Right? And so SBA can be a great option for so many reasons for so many people. So, hopefully, you got something good out of that. And, again, if you’re interested in a live q and a with Beau, I will set that up. Just drop me a line, [email protected].
Beau Eckstein [01:11:36]:
And make sure you’re checking out lawnermetresource.com/events, frequently because we got stuff going on all the time. Alright. We’ll see you next week.