Frequently Asked Questions

- Primarily For Newcomers to the Car Wash Industry -


If you would like clarification of any of these questions or answers please call Alan Bussey at 817-903-876-2308 or e-mail us at

  What loan terms do you offer for car washes to be constructed?

For someone new to the industry, whether buying or building, we can arrange a loan with about 20% all-cash down.  This is the lowest down payment available in the lending industry.

Every car wash financing situation is unique. It may be possible for you to put down less cash than 20% if you have other good marketable collateral to offer in lieu of a part of the 20%. This other collateral is typically real estate. But the typical minimum cash investment is 15%, plus other collateral to substitute for the 15% to 20% customary down payment portion.

The repayment term is a fully-amortizing term of 20 years (3/4 of the cases), up to 25 years (1/4 of the cases).  We work to get you the longest term possible.  These loans are fully-amortizing, just like most home loans.  There is no balloon (early maturity) payment and no 'demand clause'.  You can pay the loan faster than the schedule if you wish.

The interest rate on a car wash loan below $1million is normally between Prime + 2.0% and Prime + 2.75%, variable, with Prime + 2.5% being common.  Prime is 3.25% today (as of 08/01/2010).

Each loan rate is determined on a case-by-case basis.  The rate and other terms are unique to your situation and to your specific car wash.  We design each loan structure to your specific circumstances.  We work to make the loan in your favor.  We work for you, not for the bank or the finance company.

We have fixed rate programs for larger loans, generally loans above $1million.  Most conveyor car washes can be financed with fixed rate loans.  Even if your project is not ideal for a fixed rate loan we can explain to you how to "fix" a variable rate to minimize future variable rate increases.

Fixed rate programs are based upon LIBOR, T-Bill, SWAP, and Federal Home Loan Bank rates, but the rate that you actually pay is about the same regardless of the index.  A lower index usually just has a higher margin above that index than a higher index, so the rate comes out to be about the same.

If you are constructing a new car wash the most common interest-only construction period is 6 months, but we make this up to 12 months in snow belt states and in certain other instances.

Interest during the construction period is calculated only on the amount of principal outstanding, the funded loan balance, at the end of each business day and is paid monthly from the loan.  You do not pay interest "out-of-pocket" during the construction period:  construction interest is paid from the loan itself.  Normally, the construction period is longer than it takes to build and open the car wash, so you will likely have some time to generate cash from operation of the business before you need to start making loan payments.

2.  I would like to borrow some money to get into the car wash business, but I don't want to start the work to get into the business unless I am sure that I will be able to borrow the money that I will need.  Can I complete some forms and get ‘pre-qualified’ or ‘pre-approved’?

Yes, but we can often pre-qualify or pre-approve your loan over the telephone in about 15 minutes.

Before you call us, please remember that if you are buying or building, and if you are not already in the car wash business, you'll need to make a cash down payment that is about 20% of the Total Project Cost.

If you have the down payment, or can fairly easily get the cash down payment, and if your credit history is very good, the chances are very good that we can finance your purchase of an existing car wash or your construction of a new car wash.

We prefer that you have at least a Letter of Intent (Offer to Purchase) signed by the car wash site land seller before you call us.  After all, if you are not in agreement with the seller on purchase price there is little reason for us to talk.

If you are building, already own the site land, and if you bought the land fairly recently your equity in the land, based upon your original purchase price, will count dollar-for-dollar toward your down payment.  If the land cost is less than 20% of the Total Project Cost you will probably need to make up the difference with a cash down payment so that the total of the land cost and the cash down is 20%.

If you are building, and if you bought the land fairly recently, and if the equity in the land is more than 20%, we can likely ‘refund’ back to you in cash the excess equity in the land.

Please call us if you have a contract or are close to getting a contract to buy a specific existing car wash, if you have a contract or are close to getting a contract to buy a specific site for a car wash, or if you already own the car wash site.

3.  I don't have much money, but I have equity in other commercial property, in my home, and in a rent house that I own.  Can I refinance my other properties to get the cash down payment for the car wash?


Your new personal debt from the refinancing is analyzed along with any other personal debt that you may have.  Borrowing your down payment is acceptable as long as you can comfortably pay the loan payments from your present personal income without considering any income from your new car wash.  Generally, your personal loan payments and other personal fixed obligations need to be no more than about 40% of your personal gross income from sources other than from the car wash.  

We recommend that you NOT borrow any money for your down payment that will appear on your credit bureau report until after you have discussed this with us.  It might be best in some cases not to borrow any money for your down payment, but instead just use personal assets as additional collateral for the car wash loan.

Do not use credit cards to borrow for your down payment!  This is especially frowned upon by the lenders.  The lenders assume that you must repay credit card debt in a much shorter time that real estate refinancing loans.

4.  I want a SBA-guaranteed loan!  Shouldn't I contact my local SBA office and my local Certified Development Company to find out what kind of loan that I can get?  Shouldn't I set up a meeting with a representative of SBA?

NO!  Do NOT contact your local SBA office and do NOT contact your local Certified Development Company directly for ANY reason.

First, particularly with regards to fixed rate "504" (five-oh-four) loans, if you go to a local CDC and/or SBA office, they CAN get a 504 loan 2nd lien debenture approved even without you having a bank approval first.  But, unfortunately for you the CDC/SBA approval will be under the CDC's/SBA's conservative terms and conditions, which is not good for you.

By getting the CDC/SBA approval first you are effectively tying the hands of ANY bank or finance company to get approved what would likely be a better overall loan structure for you.  We have seen this exact scenario a number of times.  NEVER go to a CDC or SBA office and NEVER let a CDC or SBA approve a 2nd lien loan (effectively a complete 504 loan structure), without first being completely satisfied with a commitment letter from a bank or finance company.

Getting a loan structure approved by SBA/CDC first can easily cost you tens of thousands of dollars more cash down payment, even more than $100,000 on larger car washes, and can easily and unnecessarily tie up your personally owned assets as collateral.

Second, truthfully many of the SBA and CDC offices prefer that you work through the lender.  They are not usually organized to work with applicants directly.

Third, you will not learn any more about the SBA programs than you will from your experienced lender (hopefully us!) - so save your time.

Fourth, and this happens much more often than you might think, if you contact these offices directly you may (probably will) inadvertently reveal information about your car wash project or about you that may come back to haunt you later when your application is formally presented.  It is much better to let the lender make all of the contact with the SBA offices for you.  In this way your loan application information is presented in the best light.

For your own good, do not contact SBA directly and do not contact a CDC directly for ANY reason.

5.  I am trying to minimize the amount of my personal money that I use ‘out-of-pocket’ prior to closing the loan.  So, can I wait until after the loan closing to complete (and pay for) the construction plans and finalize the construction contract?

No.  You will need to have the plans completed and the construction contract fully signed prior to loan closing.

The lender will submit your architect prepared plans and specifications to a third-party construction management company to confirm that the project can be completed with the amount of money that you have budgeted for construction.  Second, the construction contract must be completed and signed so that all of the loan closing documentation, liens, title policies, etc. are prepared using final numbers.  It is difficult and costly for you to have the loan documentation changed.  By having the correct construction cost identified and the documents prepared correctly just once prior to loan closing could save you a considerable amount of money.  As long as the cost of the architecture and engineering work has been included in the Total Project Cost, these costs can be counted toward your cash down payment dollar-for-dollar or those costs can be "refunded" to you from the loan proceeds at closing.

We CAN get your loan approved (not closed) with at least a land purchase contract, a Site Plan and Floor Plan (on 8 ½” x 11”, or 11” x 17” paper), a ‘single-page construction estimate, and an equipment quote or contract draft.

6.  On my Personal Financial Statement should I show ALL of the cash, ALL of my other assets, and ALL of the liabilities that I REALLY have?  I am concerned that if I put too much cash and liquid assets on my personal financial statement that the lender will require me to make a larger down payment.  I am also concerned that if I show all of my real estate assets that the lender will require me to put up real estate assets other that the car wash as additional collateral for my car wash loan. And I am concerned that if I show all of my personal liabilities that my loan will be declined.  Do I REALLY need to show EVERYTHING?"

This is both an ethical and legal question.

On your Personal Financial Statement you need to absolutely honestly show everything that you own and absolutely everything that you owe.  Similarly, you should be completely honest on your Personal Cash Flow Statement.

You might be surprised to learn that most lenders do NOT want any larger down payment than is absolutely necessary to approve your loan.  This is because many of us in the lending industry are compensated based upon each loan amount and on our annual or quarterly loan volume.

Lenders prefer to see more cash and other liquid assets on your Personal Financial Statement since the loan might seem less risky.  By showing all of your cash and other liquid assets your are more likely to get your loan approved with acceptable terms.  Similarly, we really don't want to ask for more collateral than is necessary because we just don't want to deal with the additional paperwork - that costs everyone more time and more money.

On the liabilities side, if it is determined before your loan closing that you have intentionally underreported your liabilities it is certain that your loan will be declined or your commitment letter will be withdrawn.  There are an amazing number and variety of ways that lenders find about your liabilities.  Since lenders are governed by federal and state agencies, if you commit fraud on your personal financial statement you can be prosecuted for bank fraud (a felony) and such cases do happen on a regular basis.

Be honest and thorough on your personal financial statement.  Show all of the information correctly.  If you have any issues on your personal financial statement I am happy to discuss those with you long before we submit the final version for formal loan approval.  If we (Car Wash Loans) discover a problem by reading your Personal Financial Statement that might hurt your chances of getting your loan approved we will discuss this with you to develop ways to offset those concerns.

Being honest, showing all of your liquid assets and all of your liabilities, is not likely to hurt your chances of getting your loan approved, but it might REALLY hurt you chances of approval if dishonesty is uncovered.

7.  I am new to the car wash industry.  I really only have enough cash from savings and from refinancing my house to put down 15% of the Total Project Cost.  I don't own any other real estate.  Can I get a car wash loan with 15% down?

Probably not.  For newcomers, even if you have an excellent credit history and excellent income from a job or other businesses the banks and finance companies generally want a 20% minimum cash down payment.  While ours do not, many banks and finance companies want a 30% minimum cash down payment.

So, the 20% cash down payment that we offer is already the lowest in the lending industry.

If you have less than 20% cash down payment, but you DO have other real estate collateral to offer, we should be able to get the loan approved.  In other words, if you have about 15% cash down and you can offer marketable real estate as additional collateral (in addition to the subject car wash) we should be able to get the loan approved.  Normally the additional collateral needs to be a first lien or a strong second lien - usually on a single or multi-family residence.  The market value equity in the additional real estate collateral usually needs to be 1.5x (150% of) the cash down payment being substituted.

If you have substantial other real estate collateral to offer, a very few lenders might allow you to put down only 10% in cash, but in almost all cases the minimum is 15% even with substantial additional collateral.

To accumulate the down payment many new car washes to be constructed have more than one owner, some of which can be passive investors with no management responsibilities.

8.  Is it possible to use equity in your house and other properties as a down payment without actually pulling the equity out of the house and other properties?  I was wondering if the lender could just put a lien on the equity, rather than me refinancing my house and other properties.

Yes, to a limited extent it is possible to use equity in your house and other properties as a down payment without actually pulling the equity out of the house and other properties.


Typically the 'banker's' formula for calculating the equity in additional collateral is ((80% times the Market Value) minus Prior Liens). A lender is stretching when it allows even a 2nd lien to substitute for down payment, so don't expect a lender to accept a 3rd lien, no matter the value of that 3rd lien.

The 2nd lien position(s) in additional collateral would have to be such a large percentage of the value of the  additional collateral that there is no question that the lender could foreclose on the additional collateral, pay off the additional collateral 1st lien, and still have plenty of value to pay off any deficit from foreclosure of the subject car wash 1st lien. That can be a tall order.

The best thing MAY be to get a 2nd lien on your home or refinance so that you have enough cash to make a down payment of at least 10% on the wash.  Follow the formula above to make sure that you have at least another 5%, 10%, or more to offer from the 1st or 2nd lien on the additional collateral.

Note:  The number one criteria for the lender making the loan is the projected Debt Service Coverage Ratio (DSCR). The car wash and additional collateral 'Appraised Value' is only a secondary consideration. The DSCR is the historical annual NOI (EBITDA) divided by the annual car wash loan payments. This ratio needs to be AT LEAST 1.2x. The higher the loan amount on the car wash, the higher the loan payments, and therefore the lower the DSCR. The trick is to get the loan payments low enough so that the EBITDA (after annual owner withdrawals) is AT LEAST 1.2x the annual loan payments.  In a very small percentage of cases the CASH down payment will need to be at least 20% or more of the Total Project Cost (the Purchase Price plus the Closing Costs) in order to calculate a satisfactory DSCR.

Loans are based primarily upon EBITDA, and the ratio of EBITDA to the total annual loan payments, not 80% of purchase price, not 80% of appraised value, etc.. The analysis is all about the historical and/or projected cash flow, specifically the Debt Service Coverage Ratio.

9.  What does my credit score need to be?  What other considerations on my credit bureau report will the bank be interested in?


Generally you need a credit score above 650. We can work with delinquent accounts from the distant past. It is important that you continue to make all of your payments on time because that will quickly increase your score.


If one partner has a weak credit score this can be offset by strong credit scores from  other partners.


Also, you need to have revolving credit card debt less than $10,000, preferably less than $5,000.  Higher credit cards are acceptable for good reason.

  I filed for personal bankruptcy several years ago, which has since been discharged.  Can I get a loan to build or buy a car wash?

In many cases, yes.  Of course, the more distant in time the better.  We will NOT likely be able to finance you for a car wash if your bankruptcy has been within the last three years

If you have a past bankruptcy please tell us about this in our first telephone conversation.  We will discuss with you your specific case and the impact that this might have on your car wash loan application.  We have successfully worked through these situations on previous car wash loans.

The best bankruptcy situations from the lenders view is those where the loan applicant re-affirmed all of the personal debts listed in the bankruptcy with the exception of the primary debt that caused the applicant to file for bankruptcy.

11.  What are some things that I need to do in my business plan?


We receive a number of car wash business plans.  Some are very good, others not so good.  A good business plan does not have to be overly detailed or overly lengthy. The best ones are fairly specific and do not make statements of glowing generality.  (Never use the word ‘dynamic’ in your business plan.  To a lender this word is equivalent to ‘risky’.)

The most important parts of your business plan are:  1.  Site Selection, 2.  Advertising and Promotion, 3.  Competitor Analysis, and 4.  Management and Operations.


A projected balance sheet is not necessary in your business plan since our loan analysis software automatically creates that from the total project cost and down payment (or equity injection) information.

More important than the balance sheet is a thorough listing of your project costs. Don't forget engineering, architecture, legal costs for rezoning and replatting, off-site utility construction, site preparation, appraisal, environmental study, and permitting.

If your car wash will include an in-bay automatic or a conveyor, or if you plan to have fleet accounts the business plan needs to have clear marketing plan. Discuss specific advertising programs and the cost of those programs. If fleets, discuss (name) specific fleets and include letters to/from those fleet representatives that indicate their willingness to do business with you and the estimate of the number of vehicles they will wash at your business.


A business plan should include as exhibits copies of the land purchase contract, construction quote, and the equipment quote. These are often left out of business plans. Without an actual written quote it is difficult to say just what these costs will be. We recommend that you have the site plan, floor plan, and elevation done to get a good construction estimate. Of course, you won't be able to get a final construction estimate or quote until the contractor sees the final complete set of drawings and specifications.


The business plan needs to have clear advertising and promotion plan. Discuss specific advertising programs and the cost of those programs. If fleets, discuss (name) specific fleets and include letters to/from those fleet representatives that indicate their willingness to do business with you and the estimate of the number of vehicles they will wash at your business.


Many lenders will not even consider financing a car wash for investors who do not have previous significant experience in the car wash industry.  Attach documents that show that you have or are scheduled for training.  You may also have a Consulting Agreement where the consultant will spend time with you before opening and after opening.  On-the-job training needs to be evidenced by letters from owners of car washes where you have had this work experience.  Any training at the factory needs to be evidenced by a Certificates of Completion.


For our car wash loan applicants we can provide an easy-to-use preformatted business plan outline.  The outline is in question and answer format so that you can think about  and address the important issues quickly.

12.  I  need to prepare cash flow projections for the new car wash that I am planning to build.  What are some things that I need to do?


Your revenue projections should be the direct result of numerical calculations based upon the demographic information and/or traffic count information. Show your calculations. Include a demographic report (Claritas) and traffic count maps in your business plan.

EVERY revenue and EVERY expense item should be supported by an attached assumption listing. List each expense and how you estimated that expense. Get written quotes for insurance, pit cleaning, dumpster service, accounting and tax return preparation, alarm/security service. You may be able to get a written estimate of your property taxes from the appraisal district, or at least a schedule of the tax rates so that you can calculate the property taxes.  Attach these written estimates and quotes to your projections as exhibits.

A sensitivity analysis on your projections might be important to you or partners, but we think that a break-even analysis is the best.


Do not include your projections in the body of your business plan.  The reason that you want to keep them separate is because you will likely need to reprint one or the other independently, so you can save yourself much time by not having to edit and reprint the business plan simply because you have made a change in your projections.


Many inadequate projections include only a single-year annual revenue projection and annual expenses, which does not accurately describe the first year or two of business. The best projections are on a monthly basis and show a gradual increase in revenue over time.

We like to see two full years of monthly projections with a gradually increasing revenue and with  monthly seasonality factors.  Be sure to include property tax expense and a realistic cash withdrawal and/or salary for yourself.


For our car wash loan applicants we can provide a preformatted cash flow projections template that includes a startup curve, seasonality, and sample assumptions.

13.  I  have a problem:  My land seller says that I MUST purchase the land soon or else he is going to sell it to someone else.  The seller is not willing to wait until I get the construction permits approved and my construction loan closed.  What can be done?

We can usually finance your purchase of the land with a ‘bridge’ loan.  In this instance the car wash construction and permanent loans must be approved first.  While you are working to complete your construction plans, getting all of your construction and equipment contracts completed, and getting your permits approved you can close into your bridge loan to get ownership of the land.

The down payment for the bridge loan is usually the down payment that you will need for the entire project, which coincidentally is approximately equivalent to 50% cash down for the land.  For raw land speculators the down payment for land is usually 50% anyway, so the banks generally go along with buying the land for car wash early if necessary.

Before buying the land early you want to have a written letter from the municipal Zoning and Permitting Office that the zoning is correct and that they see no serious issues that would prevent you getting a construction permit.  Prior to closing on the land you’ll want to have at least a Phase I Environmental Survey completed and have your geotechnical (soil testing) report done.

14.  I would like to self-contract the construction of my new car wash.  My bank won't let me do that.  Can I self-contract with Car Wash Loans?

In some cases, yes.  This is handled on a case-by-case basis.

But, please be aware that almost no lender will allow you to function as your own contractor if you do not have experience constructing a car wash. There are some unique aspects to building a car wash, and there are some lien issues and insurance issues with general contracting.  We have had some contractors who have at least gotten a "straw" contractor to handle the paperwork for a nominal amount, typically $10,000.


If you are a licensed general contractor and have experience with construction projects similar to your car wash then you should be able to act as your own general contractor.  You will need to go through the bank's customary contractor approval, which is based upon the AIA Form A305, Contractor Qualification, form. Remember that no bank or finance company will allow a ‘self contractor’ to show a profit on the bid or the schedule of values.


Many otherwise qualified contractors simply do not want to handle their own car wash construction, preferring to concentrate on their own contracting business.

15.   From a loan standpoint, what are some things that I should know when considering a contractor or a contract with a general contractor?

These days the lenders really want you and your contractor to use the standardized construction contract form and other important forms provided by the American Institute of Architecture (AIA).

Construction contractors are very familiar with AIA documents - these documents are commonly used in the commercial construction industry.  Often your architect or contractor already has these forms or the lender will provide them to the contractor.  The forms are copyrighted but can be easily purchased at a low cost through the AIA chapter in your area in your state.

Importantly, the contract between you and the contractor must be a "fixed price" contract, not a "cost plus" contract.  Lenders usually require that the contract be on the "Standard Form of Agreement Between Owner and Contractor - Stipulated Sum" (AIA Document A101).

As is customary in the construction industry, the contractor and the sub-contractors will be subject to a 10% retainage that is withheld until ALL work is completed. The retainage is paid according to state law, but the retainage is normally paid within 30 days of the receipt of the Certificate of Occupancy.

Normally the contractor will need to complete the "Contractor's Qualification Statement" (AIA Document A305).  This provides information to the lender and to the 3rd-party construction management firm about the technical and financial qualifications of the contractor to perform the work.   You should tell your contractor that the lender will require references and financial information about the contractor as is called for in this document (A305).

To receive payment for work performed ("progress payments") the General Contractor completes the "Application and Certificate for Payment" (AIA Documents G702 and G703 (continuation of G702)).

16.  I will be purchasing the land with my car wash construction loan.  Once my construction loan is approved I can get started on the construction, right?  <or>  I already own land and I really want to get started on the construction while I am applying for the loan, so I can start any time, right?


This is an important issue to the title companies and to the lenders.  The lender's lien on the land must be put into place prior to any work being started.  If work is started prior to the lender's lien being filed the lien priorities can be clouded. Starting the work early makes the title company uncertain that they are insuring clear title and the lender uncertain that their lien will be in first position.  Many lenders will not make a loan (or even close a loan that has already been approved) when construction has already started.  When work on the land has already started the title company can even demand that all work cease for some period of time (60 days is common) before it will issue a Mortgagee Title Policy.

Make certain that the construction contractor and the sub-contractors do NOT move any equipment onto the land, that suppliers do NOT deliver materials to the site, and that the sub-contractors and general contractor do NOT begin any work on the land until after the loan has been completely closed and the lender has given the OK that construction can start.

17.  I have gotten my loan approved for my new car wash and we have closed on the loan. Now I'm going to start construction.  I am going to apply for an equipment lease later.  I just can't wait to get started on the construction of my new car wash!

CAUTION!  We have seen a number of people get nearly complete with their car wash building and then be declined for their equipment lease.  This situation can cause a significant delay in opening your car wash.

Do not start construction of your new car wash until you have been formally approved for the LEASE (if you are intent on doing a lease)!  If your lease application is declined during construction you might find it difficult to get approval for a second LOAN to buy equipment.  This problem can be avoided by getting a LOAN for the entire project , including the equipment, not just for the land and construction.

Most often we finance your equipment purchases in one single loan together with the land and building.

18.  I was reading about a car wash with $2,000,000 cost where the owner put in $400,000 and then amortized the $1,600,000 SBA 504 loan over 20 years.  Is it normal practice to finance the whole business all together like this, including equipment?  If so, what is the situation if you want or need to upgrade your equipment 5 years down the road?

Normally we add the land, building, equipment, engineering, architecture, permitting, closing costs, cash for operations, etc. together to arrive at a Total Project Cost.

The down payment is calculated as a percentage of this Total. The result is a lower overall down payment (or cash equity injection). The term of the loan, including the equipment portion, is often 20 years, sometimes 25 years.

If a car wash owner needs to replace the equipment after, say, 5 years he or she would ask to have the old equipment released from the UCC filing. The lender COULD require that the proceeds from the sale of that equipment be forwarded to the lender. In most cases the lender won't even ask for those proceeds, but would just release that collateral because the lender would realize that old equipment has little value. The lender will also realize that the new equipment will improve the overall value of the car wash.

An owner COULD remove the old equipment and the lender might not even be aware of this, although it is ILLEGAL to remove the existing collateral equipment without the lender agreeing and the lender releasing the collateral from the UCC filing.

In one scenario, if the car wash were to be foreclosed and sold by the lender and the original equipment has been removed, the former/owner could be prosecuted. This is rare. But it COULD happen. For example, if new equipment has been installed prior to the foreclosure the new equipment lender will have a "purchase money security interest" in the equipment and could remove it prior to the foreclosure, leaving the first lienholder on the land and building with an inoperative car wash shell.

In a second scenario, assuming that the original owner/borrower replaces the equipment, at the time the old equipment is removed and new equipment installed the overall loan balance will be probably be low. The balance will probably be so low compared to the overall value of the wash that the same lender will probably want to finance the new equipment and the old equipment will be released from the filing to be disposed of as the owner sees fit.

The best idea is to communicate with the lender your plans to remove the old equipment and replace it with new equipment. The value of the old equipment will probably be so low that the lender probably will not do anything but agree to the release.

Many people wonder about financing equipment within a 15 to 25 year note, and then needing to replace the equipment within about 5 to 7 years, but in practice this is normally not a big problem. Written communication is the key.

19.  I will need a line of credit or other financing for working capital for startup operating expenses such as payroll.  Is there a way to get financing for working capital such as this for my new car wash?

Yes.  If you need working capital for your new car wash we can usually arrange a 10-year 7a working capital loan that opens at the same time as the construction loan. This loan must be cross-collateralized (joint collateralized with the construction loan) by real estate properties other than the subject car wash.  The ‘side’ 7a loan can be used for ineligible project costs and for general working capital.

Like the main car wash construction loan there is a cash down payment for the 7a loan. That also must be injected at the closing/beginning of the construction loan.


20.  How are the construction draws funded?

There is a draw schedule set by the contractor and agreed upon by the bank's construction department.  They use a 3rd-party construction monitoring/inspection company. Once the monitoring company verifies that the relevant work has been completed according to the Plans and Specifications it notifies the bank.  The bank's construction department handles the subcontractor lien releases and check disbursements.

Some lenders allow up to one draw per week, which is generous.  There is a construction loan monitoring (draw) fee, usually 1%, that is calculated just on the construction itself, not the land and not the equipment.  Many lenders do not charge per draw request – that is included in the construction monitoring fee.  In the event that your or the contractor need a draw not shown in the original draw schedule, that is OK, the bank is flexible on allowing unscheduled draws.

21.  I am planning to construct a full-serve or flex-serve car wash.  At this time I am looking to lease the land - I am trying to keep the project cost down.  Will the bank and SBA be OK with leasing the land?

Leasing the land will make financing your new project more difficult.  Some lenders will not approve loans where the new car wash will be on leased land.  More importantly when you get ready to sell the wash, potential buyers will also have extreme difficulty in getting financing.

It is true that a distinct minority of car washes are on leased land, but many of these are cross-collateralized with other properties in addition to the car wash to make them financable.

Definitely consider getting a right of first refusal AND an option to buy the land.  You should also consider a lease-to-own provision where a portion of the lease payment applies to a pre-determined purchase price.  This pre-paid portion counts 100% toward to cash down payment when you actually close on the land purchase.

22.  What will I need to do to get my loan pre-approved?  What does pre-approval really mean?

To get your pre-approval done we will need personal financial statements on all of the partners; the first page of the last two years of personal tax returns on the partners; the rough project cost itemization; the street address of the proposed car wash; and a copy of the mutually signed Letter of Intent (Offer to Purchase), the Sale/Purchase Contract, or the land purchase Closing Statement.

Unlike a credit card pre-approval or pre-qualification, a car wash loan pre-approval from me is for REAL.  I can discuss your specific business proposal with several lenders.  I will then structure your loan to your best advantage.  This includes setting the down payment and other equity; determining additional collateral, if any; determining the best interest rate index and margin to suit your needs; determining the best prepayment penalty schedule; setting the repayment term; and determining the construction loan terms.  I work to make your car wash loan the best that it can be for YOU, not necessarily for the bank.

In just about every case the loans that we arrange and get formally approved are identical to the ones that we got pre-approved at the very beginning of the process.

23.  What is the timeline for formal loan approval?

Closing is most commonly governed by the time that it takes you to get your construction permit approval.  You do not need to actually purchase your permits before the loan closing because the lender can fund your purchase of those with the first loan proceeds.

The second most common impact on the timing of the loan approval is the time that it takes to get the appraisal completed, which is normally three to four weeks.

The third most common impact is the time that it takes to get your contracts completed.

Once the loan application package is completed, including the business plan and the cash flow projections, we can usually have your loan formally approved within 5 to 10 business days.  The appraisal can be completed within 15 to 20 business days, and the closing can occur within about 10 business days after receipt of the appraisal and environmental report reviews.  So, the total time to close, assuming that you have your construction permits, is about 30 to 40 business days, about 6 to 8 calendar weeks.  For a small business loan this is very fast.

We want to finance your car wash!

Back to Home Page           Back to Main Menu

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

© Copyright by Alan L. Bussey, 1999 through 2009    All Rights Reserved     Updated 11/01/08