Business Loans
for Car Wash

Small business owners looking to open a new car wash or acquire an existing business will have different funding needs than existing business owners.

If you’re buying a business, in addition to the purchase price, you’ll have to pay lawyers to look over and prepare documents, accountants to review the books, and other professionals to help close the sale. The amount of money you need to put down or the percent of the purchase you need to fund through borrowing will influence the type of financing that’s best suited for your purposes. You should likely apply for a large business loan. Most car washes built from the ground-up cost between $1.5 million to $3.0 million to launch.

When you apply to open a new car wash, you’ll need a robust business plan and strong cash flow projections, as well as an excellent personal credit score. Lenders could require that you pledge personal assets – such as investment or retirement accounts – to secure the loan. Give yourself plenty of time to get financing in place before breaking ground.

Opening a new car wash or investing in touchless machines? You’ll have to locate an appropriate building or lot and cover monthly rent or the mortgage while possibly building from the ground-up or renovating it. Since a car-wash building is a single-use, i.e., it’s difficult to turn it into another form of business, sometimes lenders are reluctant to advance the funds to build one. If you defaulted on your loan, the building could sit empty until they find a buyer who wants to enter the industry.

There will be upfront costs like paying contractors, purchasing equipment and supplies, and training employees. Once you’re open you’ll have to pay utility bills and other fixed expenses before the operation turns a profit. Small business owners expanding or investing in an existing car wash could face many of the same costs.

Here are some of the most popular reasons those in the car wash industry take out small business loans:

• Purchase, renovate, or build out a new space
• Buy new machinery, such as touchless or hybrid machines, to attract new clientele
• Replace existing outdated or broken machines
• Market a new business
• Cover operating expenses during lean times

Once you know why you need the money you can make a budget. Comparing that budget to your cash on hand or cash reserves tells you how much you’ll need to borrow.

Before borrowing, determine how the new debt will impact your business’s cash flows. After you’ve paid fixed expenses like the mortgage and utilities at your car wash, how much free cash flow is available to make loan payments? Take a hard look at your budget before you borrow so that loan payments won’t harm your business.

Lenders calculate your monthly loan payment by multiplying the capital borrowed by the interest rate, then  spreading that amount over the repayment period. They’ll also add on any fees. If the monthly payment on the loan you need isn’t affordable, scale back your project.

The car wash’s cash flows must cover the loan payments – before, during, and after the project. When putting together your budget and determining what you can afford to borrow, don’t forget to include a plan to pay back the loan. Build in some cushion, too, if there are delays or equipment breakages that impact your bottom line.

If you have poor credit, or have defaulted on a loan in the past, it will limit your borrowing options. Lenders are reluctant to work with borrowers who have low personal credit scores or whose businesses had difficulties in the past. And your business and credit history also impacts the loan’s rate and terms.

Before applying for loans, pull a free copy of your credit report and check your score. Most banks only work with borrowers who have credit scores above 750, at least two to five years in business, and strong financials. Depending on what it says, you may want to skip applying at a bank and go directly to alternative lenders.

You can still borrow with less-than-stellar credit or some hiccups on your credit history, but you’ll have an easier time working with an alternative lender. These lenders work with borrowers that banks won’t consider.

Your credit score and business’ credit history are an important part of any loan application. Lenders view a credit score as a sign of your creditworthiness, and it will impact their willingness to lend to you and the loan’s terms. Small business owners with poor credit will find it harder to borrow because lenders view them as a bigger risk. 

Before applying for a loan, check your credit score. Knowing it will give you an idea of the interest rate you’ll pay to borrow and which lenders will lend to you. Since a lower credit score reflects higher risk to the lender, you’ll pay more to borrow.