Real Estate Financing For the Carwash Industry: The SBA 504 Loan

As posted by carwash.com

The recent growth of the carwash industry is notable.  Over the last five years, revenue has grown at an annualized rate of 4.0% to $12.3 billion, according to www.ibisworld.com, and experts forecast this type of growth will continue. Carwash owners and auto detailers can capitalize on these trends by owning or expanding their facilities.

When you own your carwash or detailing facility, you not only stabilize your occupancy costs, but you can also design the business as you see fit. In addition, by buying your property, you will gain tax benefits, build equity and invest in your future.

Owning your own facility may seem unobtainable. However, the SBA 504 loan is an accessible financing solution specifically designed for business owners looking to make the switch from leasing to owning.

Why Choose the SBA 504 Program?

The SBA 504 loan is an affordable financing option that allows carwash owners to buy a building, land, construct new facilities, renovate their space or buy new equipment. The best part is, the terms are more attractive than what conventional financing typically offers. These advantages include:

  • Low down payment: Paying as little as 15% of the total project cost allows business owners to conserve working capital.
  • Long terms: You can choose between 10, 20 and 25 years.
  • Below-market interest rate: A fixed-rate loan fully amortized over 25 years means your monthly payment stays the same, and there is no balloon payment at the end of the term.
  • No limit to total project cost: You can think big.
  • No additional collateral required: The only collateral required is the subject property.
  • Versatility of funds: Funds can be used to purchase land or buildings, construct and expand existing property, purchase equipment and even refinance commercial mortgages with cash out.
  • Support team: Business owners who utilize the SBA 504 program get ongoing support from a certified development company (CDC). The CDC guides business owners though the loan process, helps with the paperwork and application and is a partner though the life of the loan.

How is the 504 Loan Structured?

The 504 Loan is administered by a CDC. The loan is granted in conjunction with a conventional lender that will typically provide 50% of the total loan amount. The SBA/CDC provides up to 35% of the total project cost at a fixed, below-market rate. Carwash owners would only need to provide 15% of the total project cost as a down payment. This down payment is much less than conventional loans.

504 loan Carwash Success Story

The Grand Prix Car Wash & Auto Detail Center in Palm Desert, California, was established by Vietnam veteran Harry Fox in 2003. In 2013, Fox and his wife Sue secured their first SBA 504 loan totaling over $2.9 million. The funds were used to refinance their commercial mortgage debt for a more favorable rate.

In 2016, the Fox’s qualified for their second SBA 504 project, totaling over $800,000.  This time, the funds were used to purchase the latest carwash equipment and helped to improve the self-service area. By securing multiple SBA 504 loans, the owners stabilized their monthly occupancy costs, conserved working capital and successfully expanded their business. The Grand Prix Car Wash continues to operate as a popular, full-service, family owned carwash.

Get Started by Prequalifying for a 504 Loan

Qualifying for a 504 loan is easier than you may think. In fact, most businesses in the U.S. qualify, as long as they meet a few simple guidelines as a privately owned business that operates for-profit.

If you are ready to see your carwash or auto detail business expand, don’t hesitate to get prequalified. Remember, owning your facility is far more advantageous than leasing, and the SBA 504 loan is designed to make property ownership a reality.

TMC Financing is the national leader in SBA 504 hotel financing. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process.

Kurt Chambliss

Kurt Chambliss is Executive Vice President of Sales and Marketing for TMC Financing, focused on serving small business clients throughout San Francisco’s East Bay. With over 16 years of SBA 504 lending industry experience, Kurt seamlessly guides clients through the loan process helping to secure SBA financing for small businesses and introducing them to the best first mortgage lenders that meet the clients’ needs, supporting them through the entire process. Kurt acts as an advocate for small business owners, and is passionate about helping small businesses grow and succeed.
Kurt Chambliss