How To Get An SBA 504 Loan For Your Car Wash

how to get an sba 504 loan for a car wash

Car owners are using car washes more and more often. Every year, Americans spend $5.8 billion at car washes. That’s 8 million cars a day being soaped up. 90% of the country’s 100,000+ car washes are small, independent businesses, and the industry is expected to grow by 1.7% per year through 2021. The profit margin will rise from 16% of revenue to up to 19%, citing a high-level industry report. If you are a car wash owner and you are looking for a loan, you should know about the Small Business Administration’s 504 loan program.

Why the SBA 504 Loan for a Car Wash?

It can be hard to get a conventional loan for a car wash. Conventional banks can be extremely selective about whom they approve. Car washes are considered single-purpose properties (not easily converted to other uses), which can make banks and other conventional lenders more hesitant to lend to these businesses. In their eyes, it is a higher risk to invest in properties like this. Even if you are approved, you will likely face a down payment of up to 40% and a balloon payment at the end of the loan’s term. This means that you would be faced with several years’ worth of payments rolled into one at the end of the loan term. At that time, you would be forced to either make that enormous payment or refinance the loan.

Non-traditional lenders have stepped into this void, some offering specially targeted financing opportunities for car wash owners. However, their conditions are likely to be inflexible, with high interest rates and short terms.

The 504 loan offers loans for 10 or 20 years at a fixed, below-market rate. In September 2017, the rates for single-purpose properties like car washes were 4.37% for 20-year loans and 4.13% for 10 years. The loans are fully amortized, which means that there is no balloon payment at the end, unlike many conventional loans. Business owners contribute just 15% of the loan as a down payment.

What You Can Do With the 504 Loan

A 504 loan can be used to buy land, buildings or equipment with a service life of 10 years or longer. It can also be used to construct a building or to renovate and upgrade buildings or equipment. A car wash owner might need financing for any of those things.  It can cost around $500,000 to equip a car wash, and this otherwise daunting price tag can be easily achieved with a 504 loan. Just make sure that the equipment you buy with a 504 loan has a 10-year service life!

Client Success Story

A good example of what can be done with a 504 loan is The Grand Prix Car Wash & Auto Detail Center in Palm Desert, CA. The car wash is owned by Harry and Sue Fox. Harry, a Vietnam Era veteran, established the car wash business in 2003 with his wife. The corporation operates a full-service family-owned car wash and is proud to offer their customers in Coachella Valley the absolute best of detailing, polishing, carpet steam cleaning, and small business fleet program offerings. They added additional employees and applied for a second loan in 2016.

How It Works

A 504 loan is administered by a Certified Development Company (CDC), a non-profit organization set up specifically for the purpose of administering SBA loans. A conventional lender partners with a CDC in a 504 loan (this partner can be a bank of your choice, or TMC can find a lender that best suits your needs). The size of the loan is unlimited, since you can borrow any sum from the conventional lender that you agree on. The loan has three parts:

  • The first is a loan that comes from a conventional lender and amounts to 50% of the total loan. You and that lender determine the amount and conditions of that loan, which becomes your first mortgage.
  • Your CDC facilitates a separate SBA loan of 35% of the total, up to $5 million. You can receive up to $5.5 million for projects eligible for the SBA’s Green Energy Program. This will be your second mortgage.
  • Finally, the borrower contributes 15% to the loan as collateral.
  • 50% Conventional lender
  • 35% CDC
  • 15% Borrower

Projects that are eligible for the SBA Green Energy Program can receive up to $5.5 million from the SBA and can receive an unlimited number of loans. You can qualify for the Green Energy Program by improving your energy efficiency by 10% or by producing renewable fuel with equipment purchased through the loan.

SBA Green Energy Program Opportunities for Car Washes

Car washes are environmentally friendly by nature, as washing your car in your driveway takes 80-140 gallons of water, whereas a car wash uses 30-45 gallons. Car washes also provide ample opportunities for participating in the SBA’s Green Energy Program. For example, washing equipment and lighting might be upgradable for greater energy-efficiency. Solar power can be used to power the car wash’s electric system and heat its water. That water can be recycled as well. Not only does that save on your water bill, but water recycled using reverse osmosis is easier on your equipment because it is mineral-free.

You can find out more about the 504 loan and the SBA Green Energy Program from an expert at your local CDC. TMC Financing is a Premier Certified Lender with the SBA. The experts at TMC can help you put together a loan package and incorporate energy efficiency into your business goals. Contact a TMC Financing loan expert today.


Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison