The car wash industry can provide lucrative opportunities to entrepreneurs, investors and small-business owners of all kinds. But for many potential car wash operators, the up-front costs associated with starting a car wash business are a source of hesitation. After all, car washes come with extensive equipment, real estate and marketing costs (to name a few).
Fortunately, you have a few options for financing a car wash business, even if you don’t have tons of money on hand. Whether you’re a representative of a private equity group, an existing car wash owner looking to expand into new locations, or an aspiring small-business owner, read on to learn how to finance a car wash.
Financing Options for Car Wash Businesses
To start with the basics, the most common option for getting the money to start a car wash is through financing. If you’re looking to buy a car wash that already exists, you can secure seller financing from the seller of the car wash.
With these arrangements, the seller will provide a loan not unlike a mortgage. You would repay the seller from your car wash profits over a set timeframe.
Seller financing can be useful in helping to ensure you don’t purchase a subpar business. However, if seller financing is not possible, you can turn to a third-party lender for adequate financing. Loan programs from banks and other financial institutions are useful for acquiring the necessary up-front capital for a car wash in a secure setting.
Bank Loans
Bank loans are a common path toward financing new business ventures, and car washes are no exception. Many banks will work with you to arrive at a reasonable financing arrangement based on the up-front costs associated with the type of car wash business you have in mind.
While the terms of your bank loan will depend on your credit score and current financial assets, you can often agree on rates and terms on a bank loan.
In many cases, your current bank will offer loan options for starting a new car wash business. However, you should also shop at other banks to compare terms and interest rates. You might also find favorable terms on loans from credit unions instead of traditional banks.
SBA Loans
If you’re opening a car wash in the U.S., you may qualify for a loan from the federal government’s Small Business Administration (SBA). SBA loans work by attaching the federal government’s backing to a loan from a private lender, whether a bank, a credit union or some other financial institution.
If your car wash business subsequently fails and forces you to default, the federal government will guarantee up to 85% of the loan, depending on the terms. American small-business owners have several SBA loan options available to them. The 7(a) loan is most common for purchasing real estate, equipment and other supplies used in car wash businesses.
Lines of Credit
A line of credit financing option may serve as a good alternative to a traditional bank loan. While loans provide access to a specific amount of funding based on the borrower’s needs, lines of credit give borrowers a revolving credit limit to work with. Like a credit card, you can use your credit limit at any time while starting your car wash business.
Once you repay that amount, you can access the money again to cover additional costs. Lines of credit can provide greater freedom and flexibility when dealing with the costs of starting a car wash business. However, you’ll need to be vigilant to stay within the financial limit of the credit arrangement.
Friends and Family
If you cannot find a suitable loan from a financial institution, you can turn to your friends and family for help. Loved ones or close friends with adequate financial assets and interest in investing in your car wash business could be potential investment partners. Make sure that your friends and family can assist you financially and that you’re comfortable potentially being in their debt as your car wash business grows.
Equipment Financing
Equipment financing works similarly to other types of loans, except that the financial backing is limited to purchasing specific equipment. Car wash businesses commonly use equipment financing since many of the larger up-front costs involve complex and expensive washing and drying components.
Term Loans From Alternative Lenders
Finally, if all other financing options fail, you may qualify for a term loan from an alternative lender. Alternative lenders include online loan services, merchant cash advances, and other credit lines. However, while alternative term loans can be helpful (especially if you don’t qualify for a bank loan), you should always investigate any loan provider before entering into a financial arrangement. Make sure that any alternative lender you work with is reputable, and always check the specific terms of any loan before signing off on it.
How To Qualify for Car Wash Financing
Before starting any new business, you should ensure your credit history is sufficient to get approval for financing. Lower credit scores may not exclude you from all financing options but may result in higher interest rates and less favorable terms.
If you’re satisfied with your current credit situation and financial assets, developing your business plan is the next step toward qualifying for car wash financing. Lenders will want to see a clear picture of not only how you will start your car wash but also how you will run it to ensure profitability.
Once this is complete, you should acquire your business license, register your car wash business, attain adequate insurance and set up your business’s banking account.
Discover Your Car Wash Financing Solutions With NCS
Optimizing your financing is much easier when you indicate that you plan to work with the best car wash products and services. NCS offers car wash business owners like you access to the industry’s leading brands for car wash equipment, cleaning and detailing agents, marketing strategies and more. So if you want to ensure that your car wash business is positioned to succeed and can take advantage of the best financing, contact NCS today.
