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Can You Get a Business Loan to Buy a Car Wash?

Yes. It is possible to get a business loan to purchase a car wash business in the United States. With a wide range of options and strategies available, it’s very important you understand the right place to start searching for the loan as well as the right bank to work with.

It is believed that there are over 100,000 car wash facilities in the United States with new locations quickly spreading out all over the country, both in-bay, automatic, and self-service.

As such, if you want to venture into this business, then it is recommended you seek loans that make it possible to get your business up and running with minimum collateral.

Within the current funding guidelines, buyers in the United States have three main financing options to take into account.

Of the three options, two are supported by the Small Business Administration (SBA) Loan Program, and this includes SBA 7(a) and SBA 504 loans; both of these loans are “always inclusive of real estate.” The last option is the traditional conventional loan.

It is pertinent to note that the SBA 7(a) is regarded as the most favored by buyers and lenders in this industry. 

Conventional loans can be very challenging and daunting to obtain especially when you are looking to use them to purchase a car wash business.

This is because banks have very stringent approval requirements and if customers fail to meet them, they won’t be approved for the loan.

Car washes are seen by conventional banks as single-purpose properties since it is nearly impossible to be converted to another use.

Types of Business Loans to Buy a Car Wash

  1. SBA-backed loan

This includes SBA 7(a) and SBA 504 loans, and both of these loans are “always inclusive of real estate.” According to experts, one of the most notable distinctions between a conventional business loan and an SBA loan is that an SBA loan is guaranteed by the Federal Government.

The government takes up a good portion of the risks that come with the loan, and this makes it possible for banks to offer viable loan terms and small-business-friendly benefits. Some of the key SBA loan program benefits include:

  • Longer loan maturities that provide borrowers with more working capital month-to-month
  • Flexible use of loan proceeds that ensures that you can leverage the funds any way you deem fit
  • Maximum Interest Rates on the loan are stipulated by the SBA. Note that rates are put in place so that small business owners can function properly in the current economy.

However, you would want to note that it takes more time and resources to apply for SBA loans especially when put in comparison with conventional loans. You’ll be expected to send in more documentation and might be able to have a slightly longer timeline for funding.

  1. Seller financing

Although not all that common, you will find that a good number of sellers are willing to offer some level of financing. In a good number of instances, the terms are flexible and come with a viable rate.

This is a valid option to consider if it is available; however, note that it ties the seller to the business for the period of the loan.

Seller financing for decades has helped a good number of entrepreneurs attain their business ownership goals. Keep in mind that the most pertinent pro is that, to some extent, seller financing ensures you don’t invest so much into buying the business.

You will be able to ride on the benevolence of the past owner to ensure you develop a viable business in little to no time. Another advantage is that sellers can be more flexible than financial institutions. You can make use of this flexibility to your advantage.

  1. Conventional bank loan

The SBA and banks have now begun to see reasons to provide loans to car wash businesses. However, you have to note that the terms and conditions for each loan will vary based on the carwash model.

Aside from that, you will find that a good number of lenders in today’s market carry carwash loans for every type of model in their portfolio.

In addition, a good number of these loans come with a balloon payment component. After a certain amount of years, the whole loan amount becomes due. Loans with balloon payments that become due will have to be refinanced. Nevertheless, just a few banks in the United States are known to offer car wash financing. Some of them include;

  • Celtic Bank
  • Metro City Bank
  • The Huntington National Bank
  • S. Bank
  • Stearns Bank Saint Cloud
  • Patriot Bank
  • TD Bank