Car Wash Financing

Is owning a car wash a good investment?

One of the most attractive factors of owning a car wash is how much profit can be generated in a short period. Small-scale, self-service car washes make a little over $40,000 per year in average profit, and bigger luxury car washes can rake in more than $500,000 per year.

What are the benefits of using a car wash business loan?

• Expand faster than you would otherwise
• Keep a healthy profit and working capital
• Renovate your existing premises
• Upgrade your equipment
• Offer premium services
• Refinance current debt

Types of car wash financing options

Here are several ways you can finance a car wash business:

• Your profit or personal savings: this allows you to avoid having to borrow money but can cause financial strain or stress.
• SBA loans: SBA loans are guaranteed by the Small Business Administration, which helps make lenders more willing to lend with low interest rates (around 3-13%). They offer the 7(a) loan program which is the most popular and can be used for any purpose, the 504 loan program which can be used to purchase real estate and major assets, and a Microloan program, which provides funding to women and minorities up to $50,000.
• Conventional bank loans: If you have an excellent credit score and strong business financial history, you may be able to qualify for a bank loan. These loans are generally difficult to qualify for, but they offer some of the lowest rates available to those who do.
• Commercial real estate loans: if you’re looking to purchase real estate, a commercial real estate loan (also known as a commercial mortgage) may offer you the best terms.
• Term loans: term loans are offered by alternative lenders and are generally the most popular option if you’re not looking to purchase a major asset. You can borrow a lump sum and pay it back over a term as short as 3 months or as long as 10 years. Interest rates vary depending on your creditworthiness, but are generally higher than SBA loans or bank loans.
• Business line of credit: A business line of credit gives you access to credit you can use as and when you need, like a credit card. You only pay interest on the amount you’ve actually borrowed, rather than the entire loan amount. This can be a particularly flexible way to borrow, but be aware that interest rates are often high.
• Merchant cash advance: If you take the majority of payments via card, your card processor may be willing to lend you a merchant cash advance. This works like any other traditional loan, as you’ll receive a lump sum, but the repayments are taken as a percentage of the transactions they process, rather than paid monthly. This can be a good, low-cost way to borrow, especially if you don’t have a good credit score (they rarely look at your credit), but make sure you can afford to miss the percentage they’re taking from your transactions.

Car Wash Financing Calculator

What are the pros and cons of car wash financing?

PROS

• With around 300 million cars on the road, there will always be customers to serve so you can safely assume you’ll be able to pay it back, provided you’ve chosen an affordable way of borrowing and have good profit margins
• You can expand your business faster than you would if you had to save
• You can take advantage of time-limited opportunities

CONS

• If you’re a relatively new business, you may not yet know how seasonal changes affect your revenue
• It’s difficult to get funding for a startup
• Interest rates can be high
• Some repayment terms are daily or weekly, which can make your loan repayments difficult to keep on top of

How to get a car wash business loan

To qualify for a car wash business loan, you’ll generally need:

• A credit score of 600 or more
• Annual revenue of $100,000
• At least 6 months in business
• No history of bankruptcies within last 2 years
• Be willing to put up a personal guarantee

Applying for a car wash business loan is usually fast and straightforward with an online application. Alternative lenders will often fund you within 14 days of your application. Bank loans and SBA loans take longer and often have more rigorous application processes. Start by comparing rates and when you find the loan that’s right for you, simply click apply and follow their instructions.

Once you’ve decided a car wash business loan is right for you, it’s time to compare rates and apply. Remember that the interest rate is one of the key factors that dictate how affordable–or not–you’ll find your loan, so try to get the lowest rate possible for your current circumstances. Once you’ve chosen the right loan for you, all you need to do is apply. You’ll soon have the funding you need to grow your car wash business.