Down Payment (Equity Contribution):
The down payment range is 15% to 23%, usually 20%, of the Total Project Cost, whether new construction or purchase. The Total Project Cost includes all soft costs for the project, including site engineering, architecture, appraisal, environmental reports, interim construction interest, loan closing costs, and cash for working capital.
A down payment based upon Total Project Cost is superior to conventional bank and finance company loans where the borrower pays the soft costs out of pocket in addition to the down payment.
If the loan is for the construction of a new car wash and you already own the land the value of the land can be counted toward the down payment. If you have owned the land for more than 2 years we can normally use the new appraised value, if you have owned it for less than 2 years we normally must use the purchase price. This policy can vary, so ask us about this if it might apply to your project.
Term (Time to Repay):
Ranges from from 19 to 25 years, commonly 20 years. We recommend that you ask for and take the longest term available to you. A longer term costs you nothing more.
With SBA guaranteed loans there is only a prepayment penalty if you pay more than 25% of the loan balance in any one year. Even if you have a 25-year repayment schedule you can pay on a 15, even 10-year repayment schedule if you wish. At the end of each annual anniversary of your loan your billed payments are reset so that the balance is amortized over the remaining original life of the loan. If you have made payments greater than your billings, for example on a 15-year schedule when you are billed on a 25-year schedule, at each anniversary your new scheduled payments will drop. So, if new road construction is done in front of your car wash, if long-term weather conditions have not been good for car washing, or if a new competitor comes into your market you can go back to the scheduled payments. Your new scheduled payments will likely be significantly lower than the scheduled payments at the beginning of the loan.
Because of this monthly loan payment option SBA guaranteed loans give you maximum flexibility. This can be a real business saver if your wash should hit tough times in the future. Probably the best thing to do is to pay somewhat more than your schedule payments when you can during the early years of your loan. In that way through lower monthly payments you will be in a better position to absorb unforeseeable cash flow declines in future years.
The range is Prime + 1.0% to Prime + 2.75%. The most common rate is Prime + 1.75%, sometimes less. Your specific rate is based upon your car wash financial performance, your personal liquidity, personal cash flow, and personal credit history.
By far most SBA loans have rates that float with Prime. When market interest rates are low lenders are reluctant to offer fixed rates. In many cases where the rate floats, the loan rate changes with Prime on the first day of each calendar quarter. Some change on the first day of each month, some on the first day of every six month period. This is negotiable.
We work for you so that you get the best loan