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June 13, 2022   /   K. Lee Graham

The car wash industry is revving up across America. This year, the US market for Car Washes & Auto Detailing is estimated to be worth $14.7 billion. Entrepreneurs will find a range of options for financing their new ventures as more capitalize on opportunities in the car wash space.

As you research your car wash financing options, ask yourself these 5 questions to plan your path to funding and speed up the loan process.

How do you plan to use the funding for your car wash business?

Think about how you want to grow your business. Do you need to update a current location, are you buying a location, or do you need some stability between busy seasons?

As a car wash owner, you can leverage financing to do things like:

  • Build new terminals
  • Convert self-service bays to automated bays
  • Switch to a newer payments system and upgrade hardware
  • Attract, hire, and train new employees
  • Add new services to increase average ticket price
  • Invest in customer experience improvements
  • Purchase a new location to build a new car wash
  • Acquire an existing car wash
  • Upgrade existing equipment, like brush heads, to service newer or luxury car models
  • Rev up marketing initiatives
  • Access working capital during slow seasons

Your car wash loan options will be different based on what you want to do with the funding. Go into the financing process with an idea of the projects you’d like to complete so you can gauge which road to funding is best for your goals.

For example, one of America’s most widely utilized small business financing solutions is the SBA’s 7(a) loan program. (You can learn more about how car wash owners are leveraging this program here).  If you qualify, you’re allowed to use the funding on a wide variety of projects as long as the project helps you build, grow, or start your business.

The SBA 504 loan could also be a better fit if you’re building a new location, purchasing or updating your equipment, building new bays, or converting bays. This loan was made specifically for business owners who need to invest in large assets. Your lender can help you determine if this program is a good fit for your goals.

How much do you need?

Your goals for growth will determine the amount of funding you’ll need. You may need significantly more funding if you’re buying another car wash than if you’re just enhancing a current one. The amount of money you need also influences which financing option is best for your business.

Your conventional loan options will be based on your credit, collateral, cash flow, and current outstanding debt. Additionally, there are a few different SBA loan options for car washes based on how much you need:

SBA 7(a) Loans: Up to $5 million

SBA 7(a) Small Loans: Up to $350,000

SBA Express Loans: Up to$500,000

504 Loans: Up to$5 million

Don’t overlook SBA Small Loans for car washes. The Small Loan program is one lenders expect to gain ground this year.  With a more streamlined application and funding process, it could be a more efficient path to financing if you know your goals will take less than $350,000 to complete.

Is your car wash a franchise?

As the car wash industry has become more consolidated, more franchise opportunities have opened up to local entrepreneurs. A franchise agreement doesn’t necessarily disqualify you from accessing an SBA loan. Your business does, however, need to meet the SBA’s “independent business” standard and be listed in their Franchise Directory to access SBA loan programs.

Some of the car wash franchises that are eligible for SBA financing include:

  • Cactus Car Wash
  • Dirty Dog’s Car Wash (Franchise Agreement and Trademark License Agreement)
  • Green Shine Waterless Car Wash
  • IQ Car Wash
  • iShine Express Car Wash & Detail
  • Mr. Clean Car Wash
  • PECO Car Wash Systems (Distributor Agreement)
  • Prime Car Wash
  • Team Blue Hand Car Wash & Detail

If you’re opening a car wash franchise that is not listed in the SBA Franchise Directory you have two options. 1.) You can submit the franchise for inclusion in the Directory. If it’s added, you can then apply for an SBA loan. Or 2.) If the franchise cannot be added or you choose not to submit it, you can move forward with conventional loan options.

Do you own other businesses?

This question is especially important to address if you’re considering SBA financing for your car wash. One major requirement business owners must pass for SBA loan program eligibility is the ‘Credit Elsewhere’ test. This simply verifies that a small business owner can’t find financing through a conventional loan. It’s meant to keep the SBA loan program benefits available to those who need them most.

If you own multiple businesses, the SBA will look at your entire portfolio to determine your credit and eligibility. If any of those businesses could assist you in securing financing through conventional loans, or if you already have secured an SBA loan for another business, you may not be eligible for further SBA financing.

As you research financing, make sure you disclose to your lender if you own other businesses. They’ll help you determine which path to funding is best based on your eligibility and your business portfolio.

How soon do you need financing?

Small business financing isn’t always a quick fix. If your car wash needs immediate funding, you may need to leverage conventional loan programs instead of the SBA’s loans.

Once your SBA loan application is approved, it can take anywhere from 20 to 60 days to obtain SBA approval and close your car wash loan. You can stay on the shorter end of this timeline if all your documentation is ready and you are responsive to requests from your lender.

While they can take longer to get funded, SBA loans are still an attractive option to many car wash owners. The benefits, including longer repayment terms, interest rates set by the SBA, and flexible use of proceeds, make the application worth it for many entrepreneurs.

If you can make the time to apply and wait for funding, SBA loans might be a great option. Just make sure the application timeline fits your plans before you apply.

Check Your Eligibility for Car Wash Financing

Check your SBA loan eligibility using the form below. A small business lending expert will be in touch shortly to discuss your financing options.

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About West Town Bank & Trust | West Town Bank has used the SBA 7(a) Loan Program to lend to franchises across the country for the last decade, providing loans to more than 100 franchises. Our most important goal is to understand what’s important to you, what’s getting in your way, and what you hope to achieve, so we can help you get there. Since 1922, we’ve been creating long-lasting relationships with our customers based on old-fashioned values and future-thinking ideas.  Whether solutions come from surprisingly innovative tools or trusted products you’re familiar with, our single-focused purpose is your financial well-being.