Many car wash owners struggle with cash flow. After payroll, real estate and equipment costs are often the largest monthly expense. One of the easiest ways to increase the cash flow of your car wash is by restructuring current business debt and leases.


By restructuring existing debt, you may be able to reduce your monthly payments by 30 percent to 50 percent or more. Below is a sample scenario:

Existing Commercial Real Estate Mortgage Loan
• Original loan amount of $1,200,000
• Current loan balance of $750,000
• 20-year amortization
• 6 percent interest rate
• Monthly payment of $8,718

Existing Equipment Loan
• Original loan amount of $150,000
• Current loan balance of $85,000
• 5-year amortization
• 8.5 percent interest rate
• Monthly payment of $3,383

Existing Equipment Lease
• Current buyout value of $50,000
• Monthly payment of $2,300

Existing Note from Partner Buyout
• Current balance of $90,000
• Monthly payment of $1,600

Total Monthly Payments: $16,001

By restructuring all of the above debt ($975,000) on a 25-year amortization schedule at a rate of 6 percent, the new monthly payment would be $6,057. That’s a monthly savings of $9,944 and a yearly savings of $119,328, resulting in a 62 percent cash flow improvement.

This may sound too good to be true, but in reality, these types of transactions are done all the time. The cash flow savings is accomplished by re-amortizing existing debt and spreading out the payments over a longer period of time. Even when the interest rate is higher on a new loan, the monthly payments will still likely be lower due to the longer amortization. For example, using the scenario above, when the $975,000 debt is restructured at an interest rate of 10 percent, the monthly payment is only $8,951, representing a monthly cash flow savings of $7,050.


For many car wash owners, debt restructuring can be the difference between a business that survives and thrives versus one that merely survives or, worse yet, goes out of business. If you are a car wash owner who is struggling with cash flow challenges, here are some things to look at to determine if you are a good candidate for debt restructuring:
1. Your current cash flow is “tight” — i.e., you’re having a difficult time paying your monthly bills.
2. You have debt that has been in place for more than four years.
3. Over the years, you have acquired and/or leased equipment on a staggered basis and now have two or more monthly payments.
4. The amortization schedules on your existing loans are less than 25 years.
5. The interest rates on your existing loans are higher than 6 percent.
6. You have already paid down a significant amount of debt on your loans.


If your car wash business is newer, or if the majority of your existing debt has been in place for less than four years, the cash flow savings may not be as significant unless the interest rate on existing loans is higher or the existing amortization schedule on existing loans is shorter than that of the debt restructure financing.

Also, most banks and loan programs have different amortization schedule requirements for real estate debt vs. equipment debt. For example, with the SBA 7(a) program, real estate debt is normally financed over 25 years, while equipment is financed over the useful life of the equipment or up to 10 years. However, if 51 percent or more of the debt being refinanced is allocated towards real estate, then technically all of the debt being refinanced can go on a 25-year amortization schedule with the SBA 7(a) program. This is an important point and one of the main drivers behind the cash flow savings. For example, if a car wash business has real estate debt of $750,000 and equipment/partnership buyout debt of $225,000, the real estate debt would be 77 percent of the total loan amount so all of the loan proceeds would be eligible for a 25-year amortization schedule on an SBA 7(a) loan.

Not every bank or lender will be interested in re-amortizing a loan over a longer period of time than what a borrower currently has in place, and conservative underwriters may have personal views that oppose such terms. In these instances, the best solution is to quickly move on to another lender with a more common sense approach to underwriting.

Loan-to-value (LTV) ratios are one of the major underwriting components. SBA loans on a car wash can go up to 90 percent LTV while conventional loans typically go up to 75 percent LTV. With this type of transaction, the lender will want to be in first-lien position on all assets including equipment, real estate, inventory, goodwill, etc. If the proposed loan amount exceeds the lender’s LTV requirements, the loan is not likely to close.


The biggest downside of restructuring debt is starting over again with a longer amortization schedule. Borrowers will also incur costs associated with title insurance, environmental reports, appraisals, and bank fees. As such, borrowers who have strong cash flow and are aggressively paying off debt may not benefit from debt restructure financing.


Car wash owners often struggle with cash flow because the amortization schedules on existing loans are too short and/or the interest rates are too high. Restructuring current debt and leases for a car wash business experiencing cash flow problems can turn a barely surviving car wash into a thriving business. Cash flow savings of 30 percent to 50 percent is not uncommon, especially when longstanding multiple debts and/or leases are included in the debt restructure. In addition, many borrowers wrap renovation costs and new equipment into the transaction, resulting in both increased cash flow and a more appealing business front offering newer equipment, tunnel skin, repaved parking lots, etc.

Jeff Rauth is a vice president of business development at Celtic Bank. Celtic Bank is a nationwide SBA lender and was named the 6th largest SBA lender in the nation for FY 2013. You can contact Jeff at