The good news is that there are many types of loans for car wash business owners, such as:
- Term loans from traditional or alternative lenders
- Small Business Administration SBA 7(a) or SBA 504 loans
- Equipment financing
- Merchant cash advances
- Credit cards
5 Car Wash Financing Options to ConsiderHere’s a more detailed summary of the car wash loan and financing options presented above:
1. SBA LoansAlthough SBA 7(a) and SBA 504 loans are difficult to qualify for; they can be a viable funding option for your small business. Their advantages include:
- A wide range of allowable use of funds: partnership buyouts, real estate, working capital, equipment, and more.
- High loan-to-value ratios (up to 90 percent for a purchase)
- Long-term (25-year) amortization period
2. Term Loans from Alternative LendersWhile all term loans follow a similar structure, they vary significantly depending on the lender. Specifically, a term loan from a traditional lender is more challenging to attain.
- It takes longer to process and requires more paperwork.
- Has more stringent qualification criteria
- Generally, it carries a lower interest rate.
- Working capital
3. Merchant Cash AdvancesWhile not technically a loan, MCAs can be an excellent option for covering short-term expenses. Once approved for a merchant cash advance, you receive a lump sum of cash. Then, you remit payment for the advance based on your credit or debit card sales, which happens automatically at an agreed-upon percentage. Since your payment amount fluctuates with your sales, MCAs can offer valuable cash flow flexibility. Also, approval is contingent on your credit card sales rather than your credit history.
4. Car Wash Equipment FinancingBusiness owners can use equipment financing to invest in car wash equipment such as:
- Pressure washers
- Drying systems
5. Credit CardsCredit cards are quick, easy to qualify for, and can be spent on any expense. However, this financing option can be very costly if you’re not careful. The average maximum annual percentage rate (APR) of business credit cards in 2021 was 22.9 percent. In addition, credit card fees for late-payments and other services are significant. The best practice for credit cards is to use them for more minor expenses and always pay off your balance as soon as possible. Ideally, you should avoid carrying a credit card balance unless you take advantage of a promotional no-APR period.
How to Qualify for Car Wash FinancingAssuming your credit score is at least 580, you should qualify for a credit card with nothing more than a simple online application. Similarly, some providers of alternative loans offer quick application processes that require minimal documentation. If you’re pursuing a cash advance, even a bad credit score won’t disqualify you if your credit card sales are high enough. On the other hand, term loans from traditional lenders and the SBA take more time to qualify for, especially if you’re a new business owner. You’ll need to provide the following documents:
- Credit Report
- Bank Statements
- Tax Returns
- Income Statement
- Balance Sheet
- Budget and Future Cash Flow Projections