Small business owners in the car wash industry must always make sure they have enough working capital to cover day-to-day expenses as well as unexpected emergencies. When your bank account is low, car wash financing can be the stopgap you need.
How a Car Wash Loan Can Help Your Car Wash
Small business loans can ease your stress about financial worries. You can use them for any expenses related to your car wash business, including:
- Supplies (soap, towels, printer cartridges)
- Equipment (computers, car wash system, vacuums)
- Working capital
Another benefit of taking out a car wash loan is that, when you pay your loan on time each month, you may actually raise your credit scores. If down the road, you want to take out more financing, that high score may help you qualify for better interest rates.
How to Finance a Car Wash
Business owners sometimes use financing to cover expenses like those listed above, but sometimes they want to finance a new car wash. In that case, here’s what you should know.
Even if you have cash for the purchase (all or partial), it may still be a good idea to finance the purchase. That way, you still have a cash reserve, should it take longer to reach profitability or you encounter an unexpected expense.
Add up all the costs you expect your new car wash business to have for at least six months. That way, you get a loan that covers you until the business is really established. You’ll need to cover everything from the real estate to equipment to insurance and payroll.
And finally, explore your financing options. As you’ll see below, there are a variety of possibilities, and there’s likely one that’s a better fit for you.
Types of Loan Options for a Car Wash
Car wash owners have many financing options. Whether you’ve got excellent credit or poor, there’s something here for you.
A term loan from a traditional bank or credit union can offer low interest rates if you qualify. You can use these loans for equipment, business expenses, or to refinance an existing loan. While you might shop with the bank you already do business with, also check offers with other lenders because you might find a better rate somewhere else.
The Small Business Administration offers affordable loans that are fairly easy to qualify for. Its
7(a) loan is one of the most popular SBA loan programs, as it can be used for many expenses, from real estate to equipment or working capital.
Line of Credit
A term loan gives you all your cash at once, but if you need a little now and a little later, a line of credit is an option. You’ll be approved to access cash up to a set amount. You can borrow from that line at any time, pay it back, and borrow it again.
You can use equipment loans specifically to purchase car wash equipment. The equipment you’re buying serves as your collateral, so you don’t need to make a down payment.
Sometimes you don’t need a loan but you do want to free up cash flow while being able to purchase items for your car wash. If that’s the case, you and your employees can use business credit cards to shop for the business. Most credit cards have high interest rates, so pay your balance in full each month so you don’t incur extra expenses.
If you or your business don’t have the credit scores required for the above options but you still need financing, there are short-term lenders who look at other qualifications besides credit scores, which may make them easier for you to qualify for. These loans tend to have high interest, so get a plan to pay them off quickly.
How to Qualify for Car Wash Financing
Lenders look at different criteria to determine whether a borrower is eligible for financing or not. The biggest factor is credit. Those with excellent credit will have no problem qualifying for loans with low interest rates. For those with less good credit, there are other options, like credit cards or short-term loans.
If your business doesn’t yet have a business credit profile, focus your attention on how to establish business credit so that you can later qualify for great offers.
A lender may also consider how long you’ve been in business. If you’re opening a new car wash, you may find it more challenging to secure financing unless you have a history of running other businesses.
Lenders may also look at your annual revenues if you run an existing business.
How to Apply for Car Wash Loans
While there may be a lengthier application process if you’re applying for a bank or SBA loan over one online (and those applications can sometimes only take minutes to complete), you’ll need the same basic information, no matter where you apply.
First, you’ll be asked for information about your business. How long has it been in operation? Where is it located? What are its annual revenues?
Then, because you will be the guarantor of the loan, meaning if your business can’t pay it back, you personally will be responsible, you will need to provide personal information like your name, address, and Social Security number.
You will be asked for the loan amount you want to borrow as well.
If you are approved, you will be presented with loan terms to review. This will include the interest rate you qualified for, as well as what your monthly payment will be and how many months you will need to repay the loan.
If you agree to the terms, you’ll sign a loan agreement. The funds will be deposited into your bank account in as little as one business day.
How Nav Can Help With Car Wash Financing
While your car wash business needs access to cash, you may be overwhelmed with where to start. Nav can help by showing you the types of loan offers you qualify for in one easy place. From there, the choice is yours. See your loan offers today!