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Get the Car Wash Financing You Need and Deserve
The first half of 2024 has brought a major and significant slowdown in carwash M&A, along with a stark decrease in the dispersion of acquiring parties. Transaction count is down ~46% and the number of sites sold and acquired is down nearly 40%, both compared to the first half of 2023. By way of most active acquirers, 2024 posted a large increase in deal concentration. Most notably, during the first half of 2023, the most active acquiror by transaction count was El Car Wash, having been the acquiring group in just 11% of the announced transactions. The first half of 2024 had Whistle Express representing a commanding 43% of deals as the acquiring group. In this industry report, we cover all announced M&A transactions in Q2 and provide a candid overview of market trends.
The Details and Workings of Car Wash Financing
Perhaps you are an entrepreneur looking to transition into the realm of car washes, or maybe you are considerably familiar with this industry and looking to expand. Regardless of your background, there's one apparent fact: it's going to cost you money and you might need some financial assistance for your endeavors, that term being 'financing'.
This write up will give you a wealth of knowledge and understanding to point you into the right direction concerning your financing needs. The goal is to help you understand financing options available to you in addition to what will be the next steps to begin and complete this process.
Determining The Magnitude of Your Financing Needs
The first step towards your financing goal is to determine how much funding you will need. Try to gather as much information as you can about your purchasing plans whether it be acquisition, re-financing, or building new.
If you are interested in acquiring a wash it would be to your benefit to know the asking price and the historical financial data of the present (and past if applicable) owner. We recommend obtaining tax returns, Profit and Loss statements, general sales, car counts, and as much documentation that can be received. This should really be the basis and starting point of your journey as lenders operate and offer in accordance with the recorded financials of your desired site. If not, it would be difficult to arrange financing without the ability to determine what the wash is in fact worth. These financial documents can shed light on the capability of loan repayment and in the interest of you, the potential profitability.
Alternatively, if you have plans to build a new wash from the ground up; the financing required may be a bit more ambiguous depending on where you are in the process. Without diving too deep into the structural costs of car washes, it is important that you take into consideration the list of costs associated with this project: real estate and land, building and fixed improvements, tunnel and support equipment, electronic components, and more. We encourage you to take advantage of our written guide explaining how much it costs to build a car wash.
Understanding Your Financing Options
Once you've established your estimated costs, you can begin to entertain and explore suitable financing options. It's only fair to note, there is no one size fits all loan specific check box. Financing needs vary case by case which equates to the fact that there are loans more or less appropriate for you. To eliminate and narrow in on a loan fit for you, let's go through all possible options.
There are two notable financing routes available and highly recommended, those being the SBA loan options and the conventional loan options.
The Small Business Administration (SBA) loan was created for just that, to aid in the provision of loans to small businesses. With mitigating risks, the SBA makes it easier for you as a borrower and in leu of the lender as well. The SBA 7(a) program can be used for "short-and long-term working capital, refinancing current business debt, and purchasing" (SBA.gov) The maximum loan amount for a 7(a) loan is $5 million to all eligible recipients. According to the SBA, eligibility derives from the following:
On the other hand, the SBA 504 loan veers to the more complex scope yet in comparison this loan program can meet greater financial needs. SBA 504 solely provides long term financing options in which your wash must have a net worth less than $15 million and an average net income of less than $5 million after federal income taxes for two years prior to application. (SBA.gov)
Likewise, you may be considering the conventional loan option. The notable difference between a conventional loan and an SBA loan happens to be the term length and interest rate. In short, conventional loans traditionally have shorter terms and higher interest rates (bankrate.com) Conventional loans are more so categorized similarly to personal loans, where businesses or in this case your wash can repay the loans over an agreed-upon negotiated term. A typical conventional loan is best fit for more established businesses in which one might find recorded proof of solid financials and gain. If this option looks to be your preferential loan, it would be to your benefit to prepare a thorough plan to action along with realistic financial projections for your wash.
Average Terms:
Step-By-Step Guide To Getting Car Wash Financing
Securing car wash financing is a process that starts well before a loan application is submitted. Lenders want to understand the project, the borrower, the existing or projected financial performance of the wash, and how the loan will be repaid. Whether you are acquiring an existing car wash, refinancing a current loan, or building a new location, the following steps can help you move through the financing process with greater clarity.
Step 1: Identify the Purpose of the Financing
The first step is determining why you need financing. A car wash acquisition, new development, refinance, equipment purchase, or expansion project may each require a different lending approach.
For an acquisition, the lender will usually focus heavily on the existing financial performance of the wash. For a new build, the lender may place more emphasis on development costs, projected revenue, market demand, borrower experience, and the overall business plan. Defining the purpose of the loan early helps narrow the list of financing options that may be appropriate for the project.
Step 2: Estimate the Total Amount of Funding Needed
Once the purpose of the loan is clear, the next step is estimating how much capital will be required. For an acquisition, this may begin with the asking price, historical financials, equipment condition, real estate value, and any immediate improvements needed after closing.
For a new car wash build, the total funding needed may include land, site work, building and fixed improvements, tunnel and support equipment, water treatment systems, electronic components, signage, permitting, professional fees, and financing costs. Because new developments often include more variables, it is important to build a detailed budget rather than relying on a rough estimate.
Step 3: Gather Financial Documents and Business Records
Lenders typically need documentation that supports the value of the business and the borrower's ability to repay the loan. For an existing car wash, this may include tax returns, profit and loss statements, sales reports, car counts, membership data, payroll information, utility expenses, and other operating records.
For a new development, the documentation may include construction estimates, equipment quotes, site plans, market research, traffic data, financial projections, borrower financial statements, and a detailed explanation of how the wash is expected to perform once open. The stronger and more organized the documentation is, the easier it becomes for lenders to evaluate the opportunity.
Step 4: Compare SBA and Conventional Loan Options
After estimating the loan amount and gathering documentation, borrowers can begin comparing financing options. Two of the most common routes are SBA loans and conventional commercial loans.
SBA financing may be attractive for borrowers who want longer repayment terms, lower down payment requirements, or additional lender support for small business financing. The SBA 7(a) program may be used for business acquisitions, working capital, refinancing, and other eligible business purposes, while the SBA 504 program is often used for larger fixed-asset financing needs such as real estate or major equipment.
Conventional loans may be a better fit for more established operators, stronger borrowers, or projects with solid financials and a clear repayment history. These loans are negotiated directly with the lender and may have different term lengths, interest rates, collateral requirements, and approval standards.
Step 5: Prepare a Clear Business Plan
A strong business plan can make a meaningful difference during the financing process. The plan should explain the borrower's goals, the type of wash being financed, the local market, the competitive landscape, expected revenue, operating expenses, staffing needs, pricing strategy, and projected cash flow.
For a new build, the business plan should also explain the development timeline, construction budget, equipment package, site selection rationale, traffic exposure, and expected ramp-up period. For an acquisition, the plan should show how the buyer intends to maintain or improve existing performance after closing.
Step 6: Speak With the Right Lending Partners
Once the project is organized, the next step is connecting with lenders that understand car wash financing. Not every lender evaluates car wash businesses the same way, and some may have more experience with acquisitions, new construction, SBA loans, or conventional commercial financing.
The goal is not simply to find a lender willing to review the file. The goal is to find a financing partner that understands the business model, can evaluate the opportunity properly, and can guide the borrower through the loan structure, documentation requirements, and approval timeline.
Step 7: Move Through Loan Review, Underwriting, and Closing
After a lender is selected, the loan moves into review and underwriting. During this stage, the lender may request additional documentation, ask questions about the business plan, review financial projections, evaluate collateral, order appraisals, and verify the borrower's ability to repay the loan.
The timeline can vary based on the loan type, lender, borrower preparedness, and complexity of the project. In many cases, borrowers should expect the process to take several weeks, especially when real estate, construction, SBA approval, or detailed due diligence is involved.
Step 8: Review the Loan Terms Before Moving Forward
Before accepting financing, borrowers should carefully review the loan amount, interest rate, repayment term, down payment requirement, collateral, fees, prepayment penalties, and any ongoing reporting obligations. The right loan should support the business not only at closing, but throughout the years that follow.
Car wash financing should be evaluated with both the immediate transaction and long-term operating performance in mind. A loan may help you acquire, refinance, or build a wash, but the project still needs enough cash flow to support debt service, operating costs, maintenance, payroll, and future growth.
How To Get Started:
All in all, if you are dedicated and committed to your plan in addition to proof of financial viability – you will undoubtedly get approval for your desired loan.
That said the typical timeline ranges anywhere from 45-60 days all predicated on the procurement of required documentation. It is important you approach the loan obtainment process properly.
CWA offers guidance throughout your entire financing journey. We've outlined step by step direction available HERE beginning with the initial conversation / loan considerations, moving on to the loan engagement process, lender referrals / introductions, all the way through one-on-one extensive business plan development. We cannot wait to help you along the way.
Car Wash Advisory is an M&A firm dedicated to serving the car wash industry. Contact us to learn more or to speak to our car wash brokers.
Frequently Asked Questions About Car Wash Financing
Car washes can be financed through several lending options, including SBA loans, conventional commercial loans, equipment financing, seller financing, or a combination of funding sources. The right option depends on whether you are buying an existing car wash, refinancing, expanding, or building a new location from the ground up.
Is it hard to get financing for a car wash?
Car wash financing can be more involved than a standard business loan because lenders need to evaluate the business model, property, equipment, cash flow, borrower experience, and repayment ability. However, a strong business plan, organized financial documents, and realistic projections can make the process much easier.
What documents do lenders need for car wash financing?
For an existing car wash, lenders often request tax returns, profit and loss statements, sales reports, car counts, utility costs, payroll information, equipment records, and current debt information. For a new build, they may also request construction estimates, site plans, equipment quotes, market research, traffic data, and financial projections.
Can an SBA loan be used to buy a car wash?
Yes. SBA loans can often be used to purchase an existing car wash, depending on borrower eligibility, lender requirements, and the details of the transaction. SBA 7(a) loans are commonly used for business acquisitions, while SBA 504 loans may be a fit for certain real estate or fixed-asset financing needs.
Can an SBA loan be used to build a new car wash?
In some cases, yes. SBA financing may be used for eligible construction, real estate, equipment, and business development costs. However, new construction financing usually requires detailed budgets, projections, borrower financials, site information, and lender review before approval.
What is the difference between an SBA 7(a) loan and an SBA 504 loan for a car wash?
An SBA 7(a) loan is often more flexible and may be used for acquisitions, working capital, refinancing, equipment, and other eligible business purposes. An SBA 504 loan is generally focused on long-term fixed assets, such as real estate, construction, and major equipment. The better option depends on the borrower's needs and the structure of the car wash transaction.
Are conventional loans available for car wash businesses?
Yes. Conventional commercial loans may be available for car wash acquisitions, refinances, expansions, or new developments. These loans are often a better fit for established operators, stronger borrowers, or businesses with solid financial records. Terms, interest rates, collateral requirements, and down payment expectations vary by lender.
How long does car wash financing take?
The timeline depends on the loan type, lender, borrower preparedness, and complexity of the project. A relatively straightforward loan may move faster, while SBA loans, real estate transactions, construction projects, and acquisitions with extensive due diligence may take several weeks or longer.
How much money do you need down to finance a car wash?
Down payment requirements vary based on the lender, loan type, borrower qualifications, project size, collateral, and whether the loan is for an acquisition, refinance, or new construction. SBA and conventional lenders may have different equity requirements, so borrowers should review the expected cash contribution early in the process.
Can you finance car wash equipment separately?
Yes. Equipment financing may be available for tunnel systems, pay stations, water treatment systems, vacuums, conveyors, and other major car wash components. Some borrowers finance equipment separately, while others include equipment costs as part of a larger acquisition, construction, or expansion loan.
Do lenders look at car counts when financing a car wash?
Yes. Car counts can be an important part of the lender's review, especially for an existing car wash. Car counts help lenders understand customer volume, revenue consistency, wash performance, and the business's ability to generate cash flow. For new builds, projected car counts may be reviewed alongside traffic data, market research, pricing assumptions, and local competition.
Why is a business plan important for car wash financing?
A business plan helps lenders understand how the car wash will operate, generate revenue, manage expenses, and repay the loan. For acquisitions, it can explain how the buyer plans to maintain or improve performance. For new builds, it can show the development strategy, market opportunity, projected revenue, expected costs, and timeline for opening.
Car Wash Advisory founder Harry Caruso joins Wash Talk to discuss slowing transaction volume, buyer activity and the outlook for car wash M&A in 2026.
The Definitive Quick Guide: Created and Written by Car Wash Advisory Team
