Financial Calculator
Including a loan payment calculator.

This financial calculator is written in Java Script. In order to use it you need a Java capable browser.  If you enter numbers in the calculator, but nothing happens, you may need to download Java at http://java.com/en/download/manual.jsp.

#### Enter data in any 4 of the 5 fields to calculate the remaining blank field.  Then calculate the remaining field by clicking on the button at the right of the blank field.

As a help to you, for a 15-year loan there are 180 monthly payments.  For a 20-year loan there are 240 monthly payments.  For a 25-year loan there are 300 monthly payments.  (Just multiply the number of years you want to use times 12.)

 What is the amount of the loan? What is the interest rate? (i.e. 8% = 8) How many payments over the life of loan? How many payments are there per year? What is the amount of the loan payment?

Steps for common car wash financial calculations

1.)  Calculate the monthly loan payments on your car wash loan.

• a.)  In the first line, enter the dollar amount of the loan.
• b.)  In the second line, enter the interest rate, such as 6.0 (six percent), or 7.25 (seven-point-two-five percent), etc..  Do not enter the percentage sign.
• c.)  In the third line enter the number of payments.  For example, if the loan is for twenty years, separately multiply 20 times 12 (months) for a total of 240 months.  Enter this number of payments.
• d.)  In the fourth line enter the number of payments per year, which is usually 12 (one per month).
• e.)  In the fifth line, leave the entry field blank.  At the far right lower corner click the "Payment Amount".  The result is the dollar amount of the monthly loan payments.

2.) Calculate the maximum loan amount that the car wash cash flow will support.  Banks evaluate the cash flow of the car wash first when determining the loan amount.  Everything else is distantly secondary.  Calculate the maximum amount that a bank will loan you based upon the cash flow of the car wash or overall car wash business.

• a.)  First, separately calculate the Cash Flow to Service Debt.  This is usually the same number as the EBITDA (Earnings Before Income Taxes, Depreciation, and Amortization; and the same number as the NOI (Net Operating income).  For the most recent complete business year add the very-bottom-line Net Income, plus the Interest Expense for the year, plus the Income Tax Expense for the year, plus the Depreciation Expense, plus the Amortization Expense.  Divide this number by 12 (months).
• b.)  Divide this average monthly Cash flow to Service Debt by 1.25.  The result is the maximum loan payment that the Cash Flow to Service Debt will support.
• c.)  Enter the result in step b into the white entry field on the bottom line in the table.
• e.)  In the first line, leave the white entry field blank.
• d.)  In the second line, enter the interest rate, such as 6.0 (six percent), or 7.25 (seven-point-two-five percent), etc..  Do not enter the percentage sign.
• e.)  In the third line enter the number of payments in the loan amortization.  For example, if the loan is for twenty years, separately multiply 20 times 12 (months) for a total of 240 months.  Enter this number of payments.
• f.)  In the fourth line enter the number of payments per year, which is usually 12 (one per month).
• e.)  In the first line, at the far right click  "Loan Amount".  The result is the maximum loan amount based upon the Cash Flow to Service Debt.
Note that the bank or finance company will usually lower the indicated maximum loan amount to 75 or 80% of the appraised amount, or to an even lower percentage.  The bank or finance company in most cases orders the appraisal after the loan has been approved based upon the Cash Flow to Service Debt and other factors.

3.)  Calculate an effective interest rate for a car wash equipment lease.  Use this to compare leases.  This only works if the last payment (residual) is essentially zero (\$1).

• a.)  For the lease amount (loan amount) use the gross lease amount, then subtract the portion of that which you must pay in advance.  This is the net lease amount.  Fax a copy of the lease to us if you need help.
• b.)  Enter the number of payments that must be made after the initial 'first and last' payments and after any other deposits.  For example, if you are getting a 60-month (5-year) lease you may be required to make, in advance, a 'first and last payment' deposit.  In that instance you will have 48 monthly payments to make, beginning at the end of the first month.
• c.)  Enter the number of payments per year (usually 12).
• d.)  Enter the dollar amount of the monthly payment.
• e.)  At the right of the interest rate blank field, click on the "% Interest Rate" button.  This will calculate your effective interest rate.

4.)  Calculate the number of payments remaining on a car wash loan.

• a.)  Enter the remaining balance of the loan (line one).  (If this is a new loan enter the loan amount.)
• b.)  Enter the interest rate of the loan (line two).
• c.)  Enter the number of payments per year, which is usually 12 (line four).
• d.)  Enter the dollar amount of the monthly payment (line five).
• e.)  To the right of the "...payments over the life of the loan?" blank field, click on the "Total Payments" button.  The result is the number of payments remaining on your loan.

5.)  Calculate a car wash capitalization rate.

• a.)  Separately, calculate the EBITDA, which is the bottom line net earnings (or loss), plus the historical interest expense during the period (usually the previous year), plus any income taxes paid or incurred during the previous year, plus depreciation expense during the period, plus amortization expense during the period.

• If you are using a car wash business tax return to calculate EBITDA look for these expenses on the first page of the return and on the supporting schedule for the Other Deductions that are only totaled on the first page of the return.  You can usually find the supporting schedule in the last few pages of the return.

Some car wash investors calculate EBITDA prior to owner withdrawals or salaries, but also calculate it after a reasonable withdrawal or salary for the genuine work that the owner has done (or will do) at a reasonable market rate.  To compare car washes you may want to calculate EBITDA before the owner withdrawal and/or salary.

• b.)  In the "...amount of loan?" line (line one) enter the anticipated purchase price.  Business financial calculators from companies like Texas Instruments also call this term "PV", which is Present Value.
• c.)  In the "...payments over the life of the loan?" line (line three) enter 99.  This is just for simplicity.  After a number of periodic payments (annual incomes) the capitalization rate result becomes closer to the 'correct' number no matter how many payments  (incomes) are entered.
• d.)  To simplify, in the fourth line, number of "...payments...per year ?", enter 1 (one).
• e.)  In the fifth line, enter the amount of annual EBITDA (cash flow) that you expect.
• f.)  To the right of the "...interest rate?" (line two) blank field, click on the "% Interest Rate" button.  The result is the capitalization rate, commonly used to compare alternative investments (car washes).

With this calculator you can also determine your return on cash invested (cash-on-cash rate of return) and the cash return on assets.  Most car wash investors calculate these numbers both before and after the loan payment.

If you want to do other calculations and need assistance, or want us to add the step-by-step instructions for a calculation, please e-mail us and we will help you.

Alan Bussey     Car Wash Loans     903-876-2308      fax:  484-737-1092

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