Any one obtained a loan?

[scout]

It would be important to all of us to see when the tide turns on getting loans. Money is going to loosen up sooner or later--. Think positive--
If the bank is regional we could consider it ourselves? I recently had my home loan interest rate reduced for a small flat rate thru a program between the bank and the feds.

 

[rph9168]

I think the big banks will be tight for some time. The local and regional guys will be more likely to loosen the purse strings a bit. The economy is showing some signs of recovery so that may happen eventually. In our area there is still a lot of vacant business locations (many owned by banks). I think until those start filling up money will remain tight.

 

[Whale of a Wash]

Our state of ND is loaded with money and we are in a housing boom, on the west side due to oil. My banker asks me when i am going to buy another apt/ Bldg or, even build a car wash , but not sure i want another car wash. The only businesses we have lost is the ones that were poorly run. Our malls are packed on weekends, and tons of canadians. The recession never hit ND, but not the ideal place to live for 5 months of the year with bitter cold. My suppliers have a customer in the oil patch with a 2 bay SS that is making close to $3k a week, Apt rent in in those areas is close to $2200 a month, and nothing available. Our state has over a $1B surplus, and we have a measure on ballot to eliminate property taxes this year which would save my three washes in this state about $17K. If you don't want to wait years for the economy to get better--This is the place--except if they ever find the fracking process for oil to be bad for the environment. Then we will be poor again. All of our main house builders are out in that area building houses, so harder to build a house on east side of state. I am 400mi, from the oil, and still feel it.

 

[Alan Bussey]

Scout -

There is plenty of money available for car washes. There is every reason to apply for a car wash loan if you have a purchase or a new construction project in mind.

The banks do seem to be more concerned these days that the applicant has a near-perfect credit history, so if it isn't perfect or near perfect the applicant needs to get it that way.

The banks also seem to expect more these days that the applicant has plenty of cash remaining even after making the cash down payment.

"Same old same old."

Alan Bussey

 

[rph9168]

I can remember operators geting loans for as little as 10% down with good credit. Never see that again.

 

[MEP001]

I can remember operators geting loans for as little as 10% down with good credit. Never see that again.

I know someone who is well established in the car wash industry, perfect credit, plenty of collateral and has one of the most successful SS washes around - his bank wanted 35%.

 

[robert roman]

I agree with everything Alan said.

Additionally, lenders want to see excellent market opportunities and management rather than ones that are just strong.

For instance, venture capitalists today are more likely to fund projects (products) that are time-savers (i.e. www.cherry.com) instead of time-wasters (i.e. YouTube, Yahoo).

Put yourself in the lender’s shoes.

Faced with two prospects, self-service projected to gross $300K versus one projected to gross $150K, which one would you lend money to?

Faced with two investors, one willing to inject 35% versus one willing to inject only 25%, which one would you lend money to?

 

[Greg Pack]

I have talked to several bankers who said they will NEVER loan money on another car wash project.....

 

[rph9168]

Ever since Hanna filed bankruptcy the industry has had problems with banks. At the time Hanna was by far the largest equipment company. When Hanna went under banks became wary of loans on car washes. I know there are several banks that will not loan on car washes and restaurants under any circumstances. In the shape the economy is in right now and the large book of business loans in general that have failed, banks are not in the lending mood for almost any business loan.

 

[robert roman]

With all due respect, I have to disagree.

The carwash industry is relatively mature and the economy is muted but developers continue to buy debt for ground-up and expansion.

Since 2006, the top 50 conveyor carwash chains in the U.S. as a group has increased store count by roughly 60 units. I would bet that none of these washes was all cash in.

Last year, Car Wash USA Express secured venture capital round funding for expansion.

Over the last several years, only one of my clients failed to obtain funding.

Yes, many big banks won’t touch carwash but, again, it depends on market opportunity, history of performance and management experience.

If I was a lender, I would have very little interest in loaning money to a new-bee with a ground-up self-service unless my due diligence as a banker proved otherwise.

For example, self-service benchmarks and equipment sales have tumbled downward significantly over the last several years, a vast majority of self-service washes have no internet-like capabilities (i.e. website, online purchasing, mobile aps, social networking), many still do not accept credit or have waste water reclaim, etc., etc.

Rob Coneybeer, co-founder of Shasta Ventures, a venture fund which focuses on mobile and web start-ups recently described carwash as an industry that hasn’t experienced significant innovations for a long time but that is now being woken up by mobile (applications or aps).

If you don’t want to believe me, you may at least want to consider the wisdom of someone like Coneybeer.

 

[Waxman]

I want to believe you but the problem I have with posts like this is that the real answer is so specific and individualistic that each business loan must be considered on its own merits. This applies to a carwash, restaurant, or gold mine (I think).

If the due-diligence is properly done by banker and entrepreneur and the loan candidate possesses the right strengths, both on paper and in the form of a proven track record of success or longevity with another career/business, then it should be clear whether or not someone should obtain financing.

All the stuff about Hanna and the industry being mature are important, but the bank just wants the wash to make sales and if that happens then everyone's happy.

 

[rph9168]

The Hanna bankruptcy had a definite effect. When the biggest player in an industry goes broke banks pay attention. While individual cases may vary, many banks have a policy against loans for car washes. To get approved today you need to have a lot of money, very good credit and a lender that is permitted to make a car wash loan.

I once worked for a guy that refused to take checks at his wash by telling people that "I have an agreement with the bank. They won't wash cars and I won't cash checks" If he were around today he might have a problem with that since banks now own many car washes that are washing cars. Guess he might have to start cashing checks.

 

[chadrpalmer]

Robert, if by all cash in you mean no debt, at least one of the top 50 is such, Carspa carries no debt and builds with cash.

 

[robert roman]

“…. if by all cash in you mean no debt, at least one of the top 50 is such, Carspa carries no debt and builds with cash.”

As I sit here and eat my cereal and strawberries, I say there is nothing wrong with this strategy as long as the firm throws off sufficient cash and doesn’t have a goal beyond slow growth in store count.

According to the literature, Car Spa hasn’t increased store count since 2007. Of course, if you are correct, the firm would also be unencumbered. Nice problem to have today.

“To get approved today you need to have a lot of money, very good credit and a lender that is permitted to make a car wash loan.”

Although terms and conditions are more stringent today, perhaps more so than necessary, everything in place is more prudent.

Bank-owned carwash real estate and washes for auction are mostly a result of bloated pro forma and appraisals, cheap debt and mediocre or marginal market opportunities.

I know you operators have kinship. However, a great many of the bank owned washes and auction properties I have reviewed should have never been built.

 

[chadrpalmer]

"The literature" must be a bit outdated, I believe the second Virginia Beach store opened in 2010.

 

[robert roman]

I know I shouldn’t waste my time, but I guess that makes you right. Hope that makes your day.

I didn’t realize I was being engaged for research so I only looked at PC&D’s lists from 2007 and 2010 because they were handy.

The reference to “literature” for your information is shorthand for writers so they don’t have to list every source of information when space is limited. Since I write a lot, I practice this.

Although I haven’t kept up with Car Spa, the company is a former client so I am not going to discuss further with you.

If you are bitter about something, don’t nit-pick me. Try putting sugar in your coffee instead of vinegar.

Have a great Easter.

 

[chadrpalmer]

Mr. Roman, I apologize if I have offeneded, possibly you misread my tone? I have avidly followed what you write, and you strike me as a man who likes to be correct. Having had direct experience with Car Spa, I thought I could help you with your information, by no means was it a desire to one up you. I put literature in quotes only because I was not sure what you were referring to, not an attempt at sarcasm. Except for the fact that its raining, I am having a great day, happy mood, sorry, again, if I came across any other way than with an intention to be informative. I respect your opinions much, and have a desire to follow in your footsteps someday, and would definitely not want to purposefully annoy a mentor.

 

[robert roman]

No need to apologize, Chad, and please drop the Mr. Roman stuff, I’m Bob.

Instead, I’m sorry I jumped on you because in the carwash forums there are sometimes a few people who will shove friendly and well intentioned comments back in the face of the commentator for apparently no good reason other than spite. Years ago, I was, at times, guilty of the same thing, but I believe I may have outgrown it.

As for your desire to follow in my footsteps someday, I’m humbled and at a loss for words. Imagine that!

Since I’m a little more than a year away from semi-retirement, you might get your shot at a mentor sooner than you expect.

Thanks for the information and have a great Easter.

Stay in touch.

 

[scout]

The federal reserve has forced all the giant banks that control a majority of commercial lending-to increase the margins. this means that in the past they needed 15 cents per dollar lent out ---they would now need 30 cents. So they were forced to stop loaning any money.This was a nation wide decree to the banking industry. This is why they could not take losses on selling off bad loans. It would only worsen there margins. 3 years and still the same.

 

[robert roman]

As far as I’m concerned, obtaining a carwash loan from a Big Bank is no longer on the horizon for most of the carwash industry.

For the foreseeable future, I believe the best chance for start-ups would be SBA, credit union, owner-financing and venture capital.

You really need to have your act together to obtain angel or venture funding but some people in the carwash industry are managing to do it.

If I had a slick business model, I would lean to venture funds.