www.americanlaundrynews.com
May 2023 • Volume 49, Number 05
The Newspaper of Record for Laundry & Linen Management
Capital investment financing strategies After the past few years, what do laundry operators need to consider when financing equipment purchases? BY MATT POE, EDITOR
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he United States, and the world, have faced many challenges over the past few years, which have led to some unprecedented economic difficulties. Fortunately, there has been some recovery from the pandemic-induced financial challenges. However, there are still challenges to be faced. In its forecast The Budget and Economic Outlook: 2023 to 2033 (February 2023), the Congressional Budget Office says:
• Economic output (gross domestic product, or GDP) is projected to stop growing early this year in response to last year’s sharp rise in interest rates. Output is projected to start growing again during the second half of 2023 as falling inflation allows the Federal Reserve to reduce interest rates, causing rebounds in sectors of the economy that are sensitive to interest rates. • Inflation was higher in 2021 and 2022 than in any other years of the previous four decades: 5.7% and 5.5%, respectively, as measured by the price index for personal consumption expenditures. The annual growth of that price index is projected to remain above the Federal Reserve’s long-term goal of 2% through 2024 and then fall near to that goal by 2026. • Interest rates on Treasury securities are projected to rise further in early 2023 and then gradually fall beginning in late 2023. • The unemployment rate is projected to increase from 3.6% at the end of last year to 5.1% at the end of 2023 before gradually declining to 4.5% by the end of 2027. These challenging factors mean that laundry and linen services need to be strategic and cautious when it comes to making capital investments in the near future.
RECENT FINANCING HISTORY
Supply-chain constraints, increasing rates and economic uncertainty have been top of mind for laundry operations the past few years, and these factors have affected laundry equipment financing/ funding. “Laundry project management has been crucial over the last few years,” says Jennifer Whitney, vice president of busi-
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(Photo: © Jan Pietruszka/Depositphotos)
ness development for Eastern Funding in New York. ”Equipment manufacturers and distributors had increased lead times, construction resources were more limited and more expensive, and interest rates increased multiple times. “Each of these factors alone would be challenging but possible to resolve quickly. With all of them happening at the same time, it created a perfect storm, which required all parties to ramp up communication, manage timelines and problemsolve if costs increased. It was truly a team effort to coordinate the completion of the project with the customer.” Joe Lamping, inside sales representative for Milnor Capital in St. Louis, says the main way he saw financing affected over the past three years was by an increase in deferments and deal-making. “It would be on a case-by-case basis for whatever the customer believed that they needed to be able to get through everything,” he shares. Customers could ask for deferments from three to six months, and sometimes the company ran deferment promotions. Lamping says the main promotion was a three-month deferment. “These would be like little three-month payments of $50 or $100 followed by 60 at whatever the normal payment would be,” he says. Interest rates were also affected the past few years, running lower, Lamping says. But now rates are rising, and financing companies’ rates are rising as well. “Nothing too drastic, but it’s definitely an adjustment,” he points out. “We are seeing solid demand for financing so far in 2023, as industry consolida-
See Finance on Page 6
LATE NEWS Monarch Brands joins Hospeco Brands Group CLEVELAND — Hospeco Brands Group, a manufacturer of personal care, cleaning and protection products to serve the janitorial, industrial supply, automotive, foodservice, healthcare and hospitality markets, reports it is merging with Monarch Brands, wholesalers and manufacturers of microfiber, commercial laundry linen, institutional textiles and wiping products. Established in 1947, Monarch Brands is headquartered in Philadelphia and delivers high-quality and value-priced textiles from manufacturers located in 10 nations around the world in Asia, Europe and Central America. Monarch Brands’ products serve diverse markets, including environmental services, hospitality, institutional, food service, industrial and janitorial/sanitation, with deep penetration in the whole of North America. Unlike other Hospeco Brands Group brands, Monarch Brands has a solid retail presence with trademarked lines, from opening price points to luxury textiles, in the Americas and around the world. The move adds complementary product lines to Hospeco Brands Group, with some strategic overlap that further deepens the microfiber and wiping product offering. It also creates opportunities for mutual growth as both entities gain new products to offer existing customers.
4/13/23 9:29 AM