Car Wash Loans

[tabascov]

Has anyone heard of or used Alan Bussey for help obtain car wash loans? He seems to have been doing it for a while and I just wanted some feedback from anyone who has heard or used him. I am considerering working with him.
Thanks

 

[CWMan]

I started a project with Alan, but bailed out when everything had a whopper SBA fee tagged on it. Use SBA as a last resort.

He seemed like a very knowledgeable and trustworthy person. With SBA, the fees are set by our governmnet, so there is no wiggle room.

 

[tabascov]

what kind of whopper fee?

 

[Waxman]

My 504 loan had a roughly $2000 fee, which I got back when the loan closed.

 

[ScottV]

SBA fees on Section 7(a) Guaranteed Loans have been temporarily waived under the American Recovery and Reinvestment Act of 2009. I just got SBA guarantees on two new wash locations and the fees were zero. On one of them with a guarantee of just over $1MM in mortgage value, the fees would have been $32K. This is probably the only thing I will ever benefit from under the stimulus plan!

The downside of this is that the SBA publishes a 6 day turnaround on all loan reviews. Mine took just over 4 weeks to get approved. But it was certainly worth the wait to avoid the 3% in fees.

ScottV

 

[MikeV]

I worked with Alan on a couple of projects. He is a good guy and knows what he is doing.

 

[Alan Bussey]

ScottV while I was not involved in your loans, yes you DID really benefit. That savings is amazing, isn't it? And this upfront savings also translates into a lower monthly payment permanently since most of the fees are financed in a SBA-guaranteed loan. And, still, even with the customary SBA Guarantee Fee that is not being charged for awhile, a SBA loan, with a lower down payment, no early balloon payment, and a long repayment term, can be very beneficial

The truth is that it takes about as long to do a SBA loan as a conventional loan. Every business loan involving real estate involves a thorough analysis, an appraisal, and usually an environmental study, so these things just take some time.

MikeV, thank you for the kind words.

Alan Bussey

 

[mac]

Along this same idea with the loans, do you guys think now is a good time to buy a wash? I am seeing a fair ammount of washes that were built at the top of the boom, and now the banks are taking them back. Anything to watch for in getting one of these?

 

[Alan Bussey]

Mac -

I really don't know whether now is a good time in general, or a bad time in general. Every car wash purchase is unique. When I have seen investors buy and make money in prior industry weak times was when a wash could be purchased at a substantial discount and where they were located in areas where they would not likely face new competition from a new car wash or from other nearby washes that could be refurbished. I think that nowadays you'd want to assess whether a new exterior-only conveyor wash could be built anywhere nearby.

Alan Bussey

 

[Greg Pack]

I think just like housing, car wash prices will return to more historical norms and more reasonable rates of return. I think you will see multiples of 2X-4X gross sales as normal sales prices. I think the 5-7X multiple is gone for a while. Pat Crowe will eventually be proven right.

Edxpresses have taken their toll here. some SS/IBAs are 50% off their highs or even more.

 

[mac]

Alan, thanks for that bit of advice about express washes showing up. As to Pat crow being right, even a blind squirrel finds a nut every now and then.

 

[robert roman]

Is it a good time to build or buy? I believe the answer nowadays depends mainly on whom you are and where you are.

For example, in Lakeland, Florida, almost half the washes are listed for sale, and yet I have been told that someone there is planning to build or is building a new express wash. Is this a good move? Based on my knowledge on the nature and extent of market and competition, I believe a new express wash would be a big hit.

In the county where I live, the industry is about 25 years behind the times. Quite frankly, I see opportunity for new washes and conversions of existing washes just about everywhere I go.

In the final analysis, economic failures (foreclosures and washes that evolve into little more than an expensive job) are usually a result of folks who ignore the fundamentals. In most cases, this means poor location, skimming over due diligence (developers and lenders), over building and equipment dealers looking to cut a fat hog on the ignorance and/or greed of investors.

 

[DJGall]

Hello Alan,

Can SBA loans be used to refinance an existing facility? Hope you are doing well, we haven't spoken in about 3 or 4 years...met you at a mini-storage convention I think..

Thanks, D.J. Gall.

 

[Alan Bussey]

D.J. -

Whew! I've been getting a lot of calls from car wash owners asking that question! Yes, SBA 7a loans in particular can be used to REfinance a car wash. The thing to know is that the loan being paid off has to have a short maturity (balloon), has to have a "Payable Upon Demand" clause, or the new 7a loan needs to have a payment that is 20% or more lower than the loan(s) being refinanced. The problem is that lenders nearly always want 7a loans to carry a Prime+ floating rate of interest. That is not a problem right now, but in a few years...who knows? Even so, with the 20 to 25-year term typical for a car wash the payments could still be significantly lower than an existing loan even if interest rates go up.

The other popular SBA program, the 504 ("five-oh-four") program, often has a fixed rate, and as a part of the Economic Stimulus package it can now be used to refinance debt when that refinancing is up to 50% of the overall loan for an expansion. A lot of banks have at least emporarily quit making 504 loans because those use more of the bank's capital than a 7a, because for the banks the secondary market for 504 loans now is nearly non-existent, whereas there is still a secondary market for 7a's.

Every refinancing loan is unique, so we really have to consider all the factors in each one. Generally, SBA loans cannot be used to "cash out" equity - the loan has to have a purpose that will benefit the business.

 

[JJJakubowski]

CageFighter:

PC will not be proven right "eventually". He was quite right back then, now, and into the future --- according to his own Personal, Particular Parameters.

Most everybody fixated on his saying that the Gross Income Multiple on a wash should only be about 3X ... which PO'd a LOT of owner/operators!

The thing is, PC's math and GIM were straightforward and legit --- again, according to his own Personal, Particular Parameters. And PC's #1 PPP was his belief/opinion that given the rough/tough risks inherent in a carwash operation (hell bent competition, weather, management/maintenance demands, etc.) an ROI of 20% should be the expected, reasonable reward for investing in such a "risky business".

So I guess what is/was/will be debatable is whether or not a 20% ROI is "right" ... and how one "rightly" computes that particular number.

My apologies for animal cruelty: that is, beating a dead horse and not letting sleeping dogs rest in peace.

JJJ/SSCWN

 

[rph9168]

Right now banks in our area are still driving a hard bargain on selling foreclosures and making loans. As far as foreclosures it seems that most lending institutions have them on the books for far more than they are worth so they are probably a better asset to them than to sell them at market value. As far as loans, I haven't seen much change over the last few months. They want 30-40% down and almost impeccable credit. I have even seen several loans that were already approved subject to re-approval. As far as refinancing I have only seen one operator try but gave up after being frustrated by the process and demands being made.

 

[robert roman]

The first thing anyone has to do while building, buying or refinancing a carwash is to get a suitable mortgage program for the project. You can get finance directly from banks, financial institutions or go through brokers. A basic question is which is better; working with a bank directly or working through a broker?

A mortgage banker is the person who will make the loan directly. The banker will present the mortgage particulars and discusses payment schedules. A broker is a person who chooses the best banker or lender who fits the investor?s financial needs and time commitments.

A mortgage through a bank is less expensive. This is due to the fact that banks process the loans directly. You have to approach the bank, discuss points and have the loan processed at the actual rates. Brokers charge a commission which results in an increase in the actual closing fees of the loan. Brokers have a right to charge as much as they want for loan processing, document processing.

Working with a bank gives faster results. This is due to the fact that the banker originates the loan. The bank also does the underwriting, prepares the closing documents and dispenses the funds. The bank has full control over the processing of the loan. In the case of brokers, they present the loan to a bank for processing and wait till the bank informs them of the completion of the loan. So the bank is not only cheaper, it is also faster.

The truth of the matter is that the investor must decide if paying the broker?s fees is worth the time saved in searching for the right lender or if going directly to the bank is best. Moreover, the investor lives with the banker once the loan closes, not the broker.

 

[Alan Bussey]

Robert -

As you are aware, car washes are ?special purpose property?. Most banks will not even consider financing a car wash of any type. A commercial loan broker who specializes in arranging loans on car washes will or should know which banks view car washes favorably or at least which ones consider them fairly. These banks are relatively few.

You said "A mortgage through a bank is less expensive." This depends upon the broker?s relationship with the bank. Some brokers do a sufficient amount of business with certain banks that they have bargaining power with those certain banks. They are viewed by the bank as a "super" customer. They get preferential terms for their applicants.

Some brokers have such good credibility with certain banks that they can get loans done where an applicant going direct would not be able to get it done, or not be able to get it done on terms as favorable.

Some brokers for all practical purposes speak on behalf of the bank because he or she has intimate knowledge of each bank?s loan programs (and SBA?s loan guarantee programs).

(Continued)

 

[Alan Bussey]

You said “Brokers charge a commission which results in an increase in the actual closing fees of the loan.” That is a blanket statement. Some brokers do not charge the applicant a commission at all. Some lenders pay a referral fee to favored brokers without any impact on the pricing of the loan to the customer. They view the referral fee paid to a broker simply as a cost of getting a strong loan request and a desirable borrower.

You said that “Working with a bank gives faster results.” That is simply not correct, or at least is not correct in all or even most cases. The loan officer that an applicant approaches directly may be so backlogged that the application process is slow. Some brokers put together such thorough loan application packages and have such a good reputation with the banks that their car wash loan applications go directly to the head of the line. This can greatly speed up the application process.

You said “In the case of brokers, they present the loan to a bank for processing and wait till the bank informs them of the completion of the loan.” Car wash loan applications are not like filling out a credit application for a refrigerator or car. It is much more complicated than that. To get the best loan the application process is a negotiated transaction, where the broker is aware of the market for such loans and is knowledgable about what competing banks will or won’t do. This puts the investor working with a knowledgeable car wash loan broker at an advantage. Usually a good broker knows what terms are really available from the bank, not just the ones that the banker might be hawking at the moment.

So, with an experienced and capable car wash loan broker the loan can be cheaper, but, also faster, and better for the investor overall.

Alan Bussey

 

[robert roman]

I?m aware of a lot of things.

I have referral agreements from lenders so I?m well aware of how much a 3rd-party can make from packaging a loan. It is considerably more than a birddog an auto dealer will dole out to someone for hawking a new vehicle to one of their friends or relatives.

Commission or referral fee, call it what you wish it is still a cost that is ultimately paid for by the borrower. A bank might hand out a toaster to start a savings account, but I?m not aware of any loan officer who would be willing, out of the kindness of their heart, to absorb a considerable portion of the closing costs of a carwash loan.

(You said that ?Working with a bank gives faster results.? That is simply not correct, or at least is not correct in all or even most cases.) Well, what it is it? Not correct at all or not correct in what 30%, 50% or 95% of the time? Moreover, over the last 2 years, I?m not aware of any long waiting lines at banks for carwash loans.

I have helped investors prepare for the loan application process. It is not like applying for a credit card but it is not rocket science. Besides preparing standard forms (app, financials, resume, etc.), every borrower must satisfy some criteria for credit worthiness, experience, liquidity, guaranty and business plan with projections and assumptions. 3rd-party assistance can be useful to streamline the process of jumping through the hoops and to ensure that things are complete. However, this assistance is no magic pill for obtaining a loan. Investors who struggle mightily to qualify imply that careful decision-making is in order rather than ?we can get it done.?

My narrative that you took exception to was provided to inform investors they have a choice and should consider the pros and cons of using a bank or broker. It contains no falsehoods. In fact, it was paraphrased from literature that I obtained from a commercial broker who did write the original argument.