If You Want To Know Why Car Wash
Business Loans Are So Difficult, It's Because Most Banks Don't Like To Do Car Wash
Yes, the cat is out of the bag. Stop the presses. You've gone to the bank
where you've deposited your money for ten years and you've got this great car wash that you want to buy.
Then you wonder why they are looking at you like you have three eyes.Why
AreCar Wash Business Loans So Difficult To
Here's the deal. Whether you
are considering SBA financing, conventional financing or private financing for carwash loans, or if you're looking to buy a car wash
franchise, the fact is a car wash is considered a special purpose facility. It's not like it's an apartment
building or an office building where a bank can hire someone to continue to run the place until a new
buyer can be found or the property can be foreclosed on in case of default. Banks don't want to
touch special purpose facilities in general just because of this one factor.
There are also two schools of thought with regards to underwriting car washes. There is a
movement across the country to drastically lower prices and drive in higher volume. Since the car wash industry has
such high markup that is something that can be done. However, what if you are not of that philosophy and
someone drives you out of business because you are not price competitive?
In addiition, the way you might underwrite a tunnel wash compared to a rollover or a
self-service car wash are totally different. They are all a cash business to some level so reporting all of
the income can be problematic to say the least.
You have to also ask yourself what type is the best type of financing. In some cases, if
you own multiple facilities, SBA and/or USDA Rural Development financing will not be an option. Truth be told, the
best deal is usually with a smaller local bank... if they will do your deal, which in most cases, they will
WHY WASTE YOUR
TIME WITH A LENDER THAT WILL NOT OR HAS NOT DONE MANY CAR WASH LOANS??
You see, it's an account executive's
job to generate loans. They're not there to be a pretty face, at least they shouldn't be! Some are quite
capable, some, not so much. A good rule of thumb if you're talking to one is to just start quizzing THEM on the car
wash industry and see if they know ANYTHING about it. If they don't, are you really going to have a lot of
confidence in their ability to get you financing?
Those nerdy, geeky bankers ALWAYS
review your transaction based on the following criteria.
That is really the whole
enchilada. They're not looking to lend because it's the popular thing to do.
Capacity refers to
your and the business' ability to repay the loan. Capital refers to the money you are investing or
have invested into the business. Collateral is the security you are providing to guarantee
the loan. Conditions focus on the purpose of the loan and are there certain conditions existing
that will enhance or diminish the probability of paying back the loan. Character refers to
your personal credit, background, experience, references and other intangibles.
Each type of car wash financing has
its distinct advantages and disadvantages. Some people ONLY make their decision based on rate,
term and/or points involved. This frequently is the WRONG decision, unless you do not care about Return On
Ivestment (ROI) or Cost Of Funds (COF). By all means, don't use that calculator of yours because
YOUR CALCULATOR NEVER LIES.
In looking for financing, first you
want to do deal with people that understand the industry more than on a cursory level. Banks and lenders don't like
to lend right now. Period. Credit is tighter than ever. To add insult to injury, the government has required
all banks to set aside more capital for potential default which in layman's term means the same banks can lend less
money for the same amount of money on deposit.
Second, wouldn't you want to go to
lenders that are actually doing and have recently done car wash loans? We are in the business of
knowing which banks and lenders have done and closed car wash loans as recently as a month prior. It is
possible that just because a lender did a loan for another business that they will not do one for your transaction,
but logically, isn't that the best place to start?
Third, half of the battle is in the
presentation. Lenders HATE getting financing packages from borrowers, mortgage
brokers, realtors and business brokers that are poorly prepared, poorly organized. Banks now will turn down
loans if they think the borrower is disorganized because of new federal guidelines that require banks to set more
money aside for default if borrowers do not provide financials and compliance documentation in future years.
They can actually have a performing loan that is not a profitable loan.
Fourth, especially when you're
purchasing a car wash, know if you're paying too much! Because it is a cash business, many sellers go off what
their business actually does as opposed to what they are declaring and you will inevitably pay too much for the
business unless sellers are properly educated as to appropriate multiples for what is acceptable.
We could go on and on and on.
Bottom line, deal with someone that knows what they're doing and has been doing it for years in this asset
find out and pre-qualify for car wash financing and what options are available, please send the following
information. You can also email us an Executive Summary of your project to firstname.lastname@example.org and we will respond to your