As the economy continues to expand, an increasing number of car wash operators are looking to build new facilities, acquire and convert old washes, or remodel existing locations. The challenge many operators and investors face is finding a loan that will offer reasonable terms. There are several reasons to consider a Small Business Administration (SBA) guaranteed loan for your car wash business.

How Do SBA Loans Work?

Many people think that the Small Business Administration makes loans to businesses. However, that actually is not the case. The SBA guarantees a percentage of the loan made by a financial institution. This makes it more attractive for lenders to take on the risk of extending credit to your business and allows them to offer favorable terms.

Do All Lenders Offer SBA Financing to Car Washes?

No. Many banks have underwriting policies that specifically limit or exclude lending to single purpose properties, like car washes, even if they can get an SBA guaranty.

What Are Some of the Benefits of SBA Loans?

There are several benefits to SBA-guaranteed loans including:

• Lower Down Payment — The typical down payment for an SBA loan is only 15 percent for experienced car wash operators and 20 percent for new investors. In some cases, car wash operators can finance up to 100 percent with an SBA loan. The down payment for conventional loans can be as high as 30 percent to 50 percent.

• Longer Terms/Lower Payments — SBA loans offer terms up to 25 years, while conventional lenders typically limit borrowers to 10- to 15-year terms (with balloon payments). The longer terms create lower payments.

• No Calls or Balloons — Unlike many conventional bank loans, SBA loans are fully amortizing. Therefore, you don’t have to worry about a balloon payment or having your loan called due at renewal.

• Lower Fees — While the initial fees for an SBA loan may be slightly higher, over the life of an SBA loan the total fees paid can be significantly less than those charged with conventional bank loans. This is primarily because conventional bank loans typically have recurring loan renewal and rewrite fees.

• Working Capital, Inventory and Closing Costs — You can finance working capital, inventory, and closing costs with an SBA Loan.

• Start Ups are Welcome — The SBA is there to help build and grow small business in the United States. Start-ups are welcome and no direct industry experience is required.

• Projections — While many conventional lenders are looking for cash flow from existing operations to support the new debt, SBA loans can be based on projections.

• SBA Loans Are for a Variety of Loan Purposes — You can finance new construction, remodel your wash, acquire real estate, purchase equipment, and refinance your existing debt with an SBA Loan.

What’s Right for You?

If you are looking to finance a new project for your car wash business, an SBA-guaranteed loan may be a good option. While SBA lending is a good fit for many projects, it may not be right for you. Other options available include equipment leasing, equipment loans, working capital loans, USDA-guaranteed loans, and conventional loans.

Financing car washes for over 25 years, Michael Ford serves as the managing director of Coast Commercial Credit, a full service nationwide financial institution specializing in car wash lending.
He can be reached at or at (800) 400-0365.