MONEY!  That’s all we ever need!

Congratulations, you found the perfect car wash in the ideal location.  Now you have to find the funds to buy it.  The big question is, Where do you go now?  Though is seems overwhelming, you’ve got to consider all your options before committing to any of them.

CASH

Once in a blue moon, prospective buyers have enough cash for a project.  Cash deals do make up a very small portion of the deals I oversee.  'Cash" doesn’t cost you in interest or other bank charges.  However, it is not always the least expensive in ‘after tax’ results.  Talk to your accountant before you decide on spending all of your available cash. 

BANKS

Many banks don’t like to lend on car washes if it’s a first time investment.  Usually they’ll want 80% down on the real estate, 50+/-% down on equipment and 0% on blue sky.  All of this depends on your relationship with the bank.  For example, if you have borrowed from the same bank before, they might be interested in lending for a car wash.  They usually won’t lend to a person who has no prior loan history with them.  Experience in financing similar amounts of money and history in the business is a must for them.  It probably will be more beneficial for you to go to another lender who really wants your business.

SBA LOANS WITH BANKS

There are banks who specialize in the use of Federal Small Business Association (SBA) loans.  The federal government guarantees the loans for 75% which helps safe guard the loans for the bank.  However it is  a lengthy process and requires a great deal of patience.  There is more paper work than you ever thought was needed and every “i” dotted and “t” crossed more than once.  This process, next to golf, can be the most frustrating experience of your life.

SBA LOANS WITH NON-BANK LENDERS

There are a number of non-bank lenders that specialize in SBA.  These do not have the stringent regulations of the banking industry.  They tend to be more user friendly and efficient than many banks.  You can acquire a 25 year loan at prime + 2.75 (set by SBA) or adjustable rate loans.  There is usually a 2.5% fee for loans between $150,000 - 700,000 plus legal and other fees.  Usually these fees are added into the total loan amount.

OTHER FINANCING OR LEASING

Need help with equipment purchases?  There are companies that offer financing up to 100% of equipment cost, freight and installation.  Terms match the life of the equipment, usually 5 – 7 years.  Rates are usually higher than banks.  Look for a company experienced in car wash loans and leases.

BORROWER EQUITY

Financing when your down-payment equity is cash.  100% financing is not an option.  You must have money to put into the deal.  How much depends on the total cost of the project.  You can expect to put down 20 – 30% in cash.  This amount cannot be borrowed from another institution.  

CROSS COLLATERAL

If the buyer has other assets (collateral), owned free and clear, the equity on these assets may satisfy the lender’s requirements for a down-payment.  Lenders usually will loan a maximum of 70% of the Loan-to-Value (LTV) based on the car wash appraisal.  The lender will accept the collateral if 70% of its value is greater than the down-payment required for the loan.  The lender will also require that a consistent second source of income be present to make the loan payments.

OWNER CARRY

Depending on the motivation of the seller sometimes the owner will carry a portion of the loan to allow a deal to proceed successfully.

EXCHANGE

If the buyer has something that the seller needs or wants (property, vehicles, etc.), the seller could be motivated to exchange some of the cost for the buyer’s asset.  You see, money is a medium for exchange and buys the benefits.  Money in itself is not the benefit.  Often the seller is selling his wash so that he can buy something else.

RETIREMENT FUNDS

Using your 401(k) or IRA funds is also an option but check with your accountant to see what the implications will be to your future retirement and taxes before disturbing your retirement plans.

FRIENDS AND FAMILY

If you truly believe in your dream, tell those close to you and if you have been successful in other ventures maybe they’ll jump on ship.

OUTSIDE INVESTORS

Only if you have a lot of experience would I go this route.  They will want to know everything about your experiences, failures and successes.

BUSINESS PLAN