Cash Wash Loans – Now

If you own a cash wash and or are thinking of buying one, you’re going to want to make sure you’re prepared to deal with the new market realities for getting a car wash loan. Bottom line is that the property is going to have to show a good income and you as the borrower will have to accept an adjustable rate mortgage (most of the time).

As far as the cash flow is concerned the car wash will have to hit a debt coverage ratio of a 1.3 in order to be considered by the vast majority of lenders. Meaning that for every dollar of mortgage payments, the borrower will have to prove $1.30 of net income (before the mortgage) to qualify. So after the borrower pays all expenses and the proposed mortgage he will have $.30 left over. This income will have to be documented by both 3 years of tax returns (business and personal) and year to date financial statements (profit & loss and balance sheet).

Most banks and lenders that look at car washes want to take the deal through the SBA. If they’ll take a crack at it in house and go conventional, you’re often looking at a 15 or maybe a 20 year amortization schedule, which tightens the cash flow considerably. The cash flow on the property will have to be really strong to still meet the 1.3 on a 15 year amortization schedule.

So as far as the SBA is concerned your most likely (like 99% of the time) looking at an adjustable rate mortgage that’s amortized over 25 years. The program offered will be the infamous SBA 7a loan that is the most popular SBA product out there though it tends to get some bad press. The 3 biggest complaints are 1. (The obvious) that the rate is adjustable 2. The SBA fee is expensive at 2.75% 3. That the SBA process is still cumbersome, though many improvements have been made.

Overall, the borrower is going to want to make sure the deal is clean and that they do everything they can in the beginning to fix any issues (like bad credit), before they submit the file.

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Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial mortgage loans or restaurant loans