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Financing Help

Junglebredcornfed

Junglebredcornfed

New member
Hello yall,

Looking for help with finding financing in my area. Found a few banks to shop around in my zip code, but wanted to see what's everyone's experience was before taking a shot gun approach.

Thank you in advance.
 
banks work off the numbers, so it all depends on income verification via tax returns of the business for the past 3 years, the value of the land and equipment and your own contribution ( downpayment).

20 years ago i used an sba 504 loan program in conjunction with a fairly local bank to get financed.
 
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Junglebredcornfed said:
Short answer no but I understand it’s a hands on business and luckily I’m handy with mechanical issues coming from a blue collar background. 550k
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In all honesty, not trying to be a Negative Nancy, you're going to have to work hard to get financing. Banks are already tightening up their lending. There was an owner on here within the last couple of months who has experience and owns other washes already, and he was having a hard time getting financing for another wash purchase. Best bet would be to get seller financing or sba. Also, down payment is going to be significant for a $550k asking price. Local banks will be a good place to start and having a good business plan that shows you will be making more than enough to pay the bank and your other expenses.

Being handy and fixing stuff is definitely a plus, but first and foremost you will be an owner/operator and will have to be able to make the business as a whole successful. You will be wearing many hats besides repair, and have to be able to get it all done, whether you develop the skills to do it yourself or find the right professionals to do it for you or guide you. The good thing is self serve is a pretty easy business to learn the basics, mastering it is a little more of a challenge.

Other thing to consider, if banks turn you down, ask them why, some will tell you the real reason and some won't. But the underwriters do this for a living, and can spot a bad deal probably before you can. That doesn't mean if they turn you down that it is a bad deal, it's just another set of eyes to help you out. They aren't necessarily the bad guy if they turn you down.
 
Is owner financing a possibility?
Just went through a purchase and owner financed the deal to get it done without having to jump through the endless hoops from the banks.
Bank wanted at least 20% down. Bank would lend on the property, building and equipment value at current interest rates. The value “good will” value the business above the value of the property, building and equipment would have to go through the SBA. SBA administrator in my county said I would probably be in the 10-12% range for that portion of the loan.
If you can get the owner to finance the purchase at 6-7% for just 5 years (20 year amortization with a 5 year ballon) you may have enough equity at that time to refi with a traditional bank. Owner puts a significant amount of extra money in his pocket by owner financing this deal or even just the business value of the bank will finance the property.
You can use this calculator to run some loan payment scenarios:

Commercial Mortgage Calculator

www.mortgagecalculator.org www.mortgagecalculator.org

Don’t let any anecdotal information from anyone here, including mine, deter you from pursuing this purchase. The owner wants to sell. Someone will buy it if they can make the numbers work. You may need to take a closer look at the purchase price and may need to negotiate that down. There are a lot of factors involved to determine if this will flow enough cash to be profitable and reach your personal financial goals.
 
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Junglebredcornfed said:
6 bay SS operating in the Houston area. I’m in talks with the owner and he’s looking to move on.
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Ever think about doing a decent down payment and seeing if he will seller finance the rest of it? If you default at any time he takes the wash back. He's completely protected and its done through a title company. It allows him to get more then he was hoping to to get for the wash..bc he's going to make interest on financing you. Theres a set amount you'll be required to pay him monthly. For him...its money in the bank bc if you default he gets it back. Lifes a negotiation! make it sound appealing to him..and let him know he's protected. This is my angle anyhow...best of luck in your journey.
 
The one thing that scares me about holding the note is getting the property back in a run-down condition. The equipment is very expensive to replace if you get it back in a broken down state.

I have recently seen a few washes near me change hands and they have gone screaming downhill fast. Un-maintained, dirty, un stocked vending, equipment out of order. How well do you think they are maintaining the automatic wash???

I understand the financial benefit of earning interest on holding the note. But is it more than I'd make investing sales proceeds into an index fund? I doubt it.

I think when I'm ready to sell, I'd prefer to receive a lump sum rather than risk getting the property back in poor condition. After I spend a long career building the business up, making improvements, rehabbing and buying new equipment do I really want to do it all again if some new owner runs it poorly???
 
Waxman said:
The one thing that scares me about holding the note is getting the property back in a run-down condition. The equipment is very expensive to replace if you get it back in a broken down state.

I have recently seen a few washes near me change hands and they have gone screaming downhill fast. Un-maintained, dirty, un stocked vending, equipment out of order. How well do you think they are maintaining the automatic wash???

I understand the financial benefit of earning interest on holding the note. But is it more than I'd make investing sales proceeds into an index fund? I doubt it.

I think when I'm ready to sell, I'd prefer to receive a lump sum rather than risk getting the property back in poor condition. After I spend a long career building the business up, making improvements, rehabbing and buying new equipment do I really want to do it all again if some new owner runs it poorly???
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One way to lower your risk on that is to only lend on the RE value, business value and any goodwill paid lump sum. That way, if you have to take it back, you can just sell the RE if you want to, no need to rebuild the business.
 
Waxman said:
The one thing that scares me about holding the note is getting the property back in a run-down condition. The equipment is very expensive to replace if you get it back in a broken down state.

I have recently seen a few washes near me change hands and they have gone screaming downhill fast. Un-maintained, dirty, un stocked vending, equipment out of order. How well do you think they are maintaining the automatic wash???

I understand the financial benefit of earning interest on holding the note. But is it more than I'd make investing sales proceeds into an index fund? I doubt it.

I think when I'm ready to sell, I'd prefer to receive a lump sum rather than risk getting the property back in poor condition. After I spend a long career building the business up, making improvements, rehabbing and buying new equipment do I really want to do it all again if some new owner runs it poorly???
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I completely understand what you're saying. There are MANY run down car washes out there that could cash flow better with some love thrown in them (I would imagine anyway?) The days of the coin Operated everything are dying.... we're in the debit card/reoccuring monthly charges days.

The only reason I'm hot for a distressed self serve wash its basically all I can afford to do. I can afford to put down a significant down payment, but I cant afford to make the whole mgic show happen. I am in the process of seeing if i can find a run down car wash that is currently up and running.. If I can cash flow it or not as it sits. Then I can only go up from where its at bc I plan on making everything modern..but it has to cash flow while being shitty still. so its only up from here! lol Nayak card readers. Stocked vending. 1 employee changing trash during the day. I want one or two IBA's, with 5-6 self serve Bays.

I live in SE PA (Bucks County). Tiny Self Serve washes with 1 In bay Automatic are going for like 800k. its totally insane.
 
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