Car Wash Financing | Top Car Wash Lenders

Last update: Jun 3, 2024

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Navigating the world of car wash financing can be challenging. With numerous options and strategies available, it’s essential to find the right bank to finance your car wash.

Typical car wash financing terms

Loan SizeUp to $5,000,000. Industry average is $2.75M – $4.25M
Loan Term25 years since real estate. 10 years for car wash equipment.
Interest RatesSBA interest rates are slightly higher than conventional loans: 9% – 10.5% in 2023.
Down Payment10% to 20% down payment is common, but SBA is enacting lower thresholds in August 2023.
Cash Flow Profits (EBITDA) of at least 115% of SBA loan payment. SBA loan payment calculator –>
Collateral
None required but lender must secure all available collateral.

Top car wash loan lenders

There are only a dozen or so banks in America that are the leaders in car wash financing. These lenders really understand the intricacies of SBA car wash loans and we recommend you contact them first to get a clean, quick deal!

RankSBA Lender# of Loans Avg LoanAvg Rate
1U.S. Bank16 $20,6509.6%
2Huntington Bank15 $200,07310.1%
3TD Bank11 $391,19111.6%
4Celtic Bank10 $2,697,45010.4%
5BayFirst National Bank5 $138,18013.3%
6Stone Bank4 $5,000,00010.7%
7Wells Fargo4 $180,20012.8%
8M&T4 $57,50011.1%
9America First FCU3 $1,444,0336.8%
10Byline Bank3 $1,581,66710.6%
11Readycap Lending, LLC3 $1,091,66712.1%
12Citizens Bank3 $2,487,66710.3%
13Noah Bank3 $285,00012.5%
14JPMorgan Chase Bank3 $190,00012.8%
15Newtek Bank3 $285,00012.5%

Recent car wash financing activity

YearQtr# of Loans Avg LoanAvg Rate*
2024164 $1,043,83910.8%
2023449 $658,47310.6%
2023363 $1,375,16310.2%
2023244 $1,070,02510.2%
2023158 $824,0039.8%
2022454 $1,469,7178.5%
2022363 $1,755,8927.1%
2022268 $1,489,5295.9%
2022161 $1,483,7085.5%
2021442 $1,119,9505.1%
20213112 $2,046,6025.0%
2021258 $1,113,0225.3%
2021148 $1,510,0945.4%

* Note that most SBA loans are variable-rate loans. The rates listed above is the initial interest rate at loan closing. Variable-rate SBA loans fluctuate by the fed funds rate set by the Federal Reserve.

Car wash industry overview

In 2021, the US car wash service market size was valued at over $14 billion and analysts expect it to grow at a compound annual growth rate of 4.8% through 2028. Research has also shown that consumers increasingly prefer washing their cars by themselves. That explains the uptick in car wash financing requests for self-service car washes.

It’s estimated that there are more than 100,000 car wash facilities in the United States with new locations rapidly opening up across the country, both in-bay automatic and self-service. If you’re looking to enter this business, definitely take advantage of SBA car wash loans to get your business up and running with minimum collateral. 

Securing financing for startup ventures can be a challenging endeavor, with many traditional lenders often hesitant to extend loans to businesses in their infancy. However, the table provided below reveals a noteworthy trend in the car wash industry — SBA lenders are still actively supporting startup car washes. This unique phenomenon can be attributed to the proven business model of car washes and the collateralization of loans, primarily backed by real estate.

Car wash startups have emerged as a distinct and favored category among SBA lenders, as evidenced by the data presented. Despite the challenges typically associated with financing for new businesses, car wash startups command a significant share of the total loan volume, with a 35% stake, the highest among the different business categories.

Car wash loans by business age since 2020

Age of Business Total Loan Volume % of Loan Volume Avg Loan# of Loans
Change of Ownership $236,514,20020% $1,653,945143
Existing or more than 2 years old $283,339,40025% $1,330,232213
New Business or 2 years or less $232,859,80020% $1,712,204136
Startup, Loan Funds will Open Business $398,946,70035% $2,241,274178
Other $2,464,0000% $821,3333
Totals $1,154,124,100100% $1,714,895 673

The proven business model of car washes contributes significantly to their appeal for SBA lenders. Car washes, as a business concept, have demonstrated resilience and a steady revenue stream. This stability is attractive to lenders who seek businesses with a track record of success, even in their early stages. The standardized processes and predictable customer demand in the car wash industry make it easier for lenders to assess risk and confidently support these ventures.

Another key factor that sets car wash startups apart in SBA lending is the collateralization of loans, often secured by real estate. Car wash businesses frequently require physical locations, and these properties can serve as valuable collateral for lenders. Real estate-backed loans provide a level of security that mitigates the risk associated with financing startups.

When comparing car wash startups to other startup categories, such as tech or service-oriented businesses, the contrast is striking. While certain startups in technology may face challenges securing SBA loans due to their high-risk nature and lack of tangible assets, car wash startups stand out as a safer bet for lenders.

The unique nature of car washes, with their established business models, tangible assets (such as equipment and real estate), and predictable revenue streams, makes them an attractive investment for SBA lenders. In contrast, tech startups, often characterized by innovation and rapid growth, may find it challenging to meet the collateral requirements and stability criteria set by traditional lenders.

 

How to get money to buy a car wash

Conventional loans are difficult to get if you’re looking for car wash financing. That’s because banks have strict approval requirements and if customers can’t meet them, they can’t get a loan. Car washes are viewed as single-purpose properties as they can’t easily be converted to another use.

That’s one of the main reasons why banks consider these businesses as high risk and tend to be hesitant in lending to them. Even if they do decide to provide car wash loans, the terms will likely require significant down payment, higher interest rates and possibly even a balloon payment requirement. Conventional loans typically offer lower interest rates than SBA loans, but rates do not matter if the bank

 

SBA loans for buying a car wash

The various loan programs of the Small Business Administration are perfect if you’re looking for money to buy a car wash. The SBA is a government agency but it’s not directly lending to business owners. It guarantees a significant chunk of the loan and the SBA’s partners lend the money. Their risk is reduced as even in the case of a default, a big portion of the loan is guaranteed by the government. Borrowers are also required to put less cash or equity down to qualify.

You can obtain an SBA loan from banks, credit unions and other conventional lending institutions. The SBA 7(a) and SBA 504 loans are the most common car wash loans that business owners opt for. Both have distinct purposes but will cover nearly all of the car wash’s needs – from buying land and equipment to construction and working capital.

SBA 7(a) loan for buying a car wash

First-time lenders generally opt for the SBA 7(a) loan to buy a car wash. The funds can be used for buying land and constructing a new car wash from the ground up or purchasing and renovating an existing business.

Any of the costs related to the construction can be covered by the loan, including but not limited to water pumps and hydraulics, conveyors, dryers, and other equipment. Funds from the SBA 7(a) loan can also be used to refinance an existing loan.

A maximum of $5 million can be borrowed through an SBA 7(a) loan for a car wash. The repayment period is typically 25 years. Current SBA loan interest rates 

Loan AmountFixed+PrimeSBA Max Interest
Rate
$50,000 – $5,000,0003.0%8.5%11.5%
$25,000 – $50,0004.0%8.5%12.5%
<$25,0005.0%8.5%13.5%

 

Carwash financing example

We know from data provided by the U.S. Census Bureau that the average car wash in the U.S. generated $593,000 in sales in 2017. Of course, car wash sales in states with large cities centers and high costs of living – such as Washington DC, California, and Texas – had higher average sales.

Taking the 2017 sales data and extrapolating forward five years utilizing a 15% inflation rate gets us to $682,000 in annual sales. Here is what the key financial metrics related to a car wash SBA loan giving those averages. We show four scenarios to highlight the two most important variables regarding SBA loan capacity for a car wash acquisition – the profitability of the car wash (as measured by a % of sales below) and the SBA loan interest rate.

Sales$682,000$682,000$682,000$682,000
Profitability15%30%15%30%
Net Profits (EBITDA)$102,300$204,600$102,300$204,600
Interest Rate6%6%10%10%
Maximum SBA Loan (25 year term)$1,153,716$2,307,432$816,245$1,632,490
Maximum Loan to EBTIDA multiple11x11x8x8x

As the table above shows, a car wash doing $682,000 in sales and $102,300 in net profits – as measured by a 15% EBITDA margin – may receive maximum car wash financing of $1,153,716 with an SBA loan interest rate of 6% but only $816,245 in financing at a 10% interest rate.  A good rule of thumb in the current ~10% interest rate environment is the maximum SBA loan for a car wash is approximately 8x EBITDA (cash flow), which is down from the 11x EBITDA multiples afforded buyers just over a year ago. As we discuss in our article on SBA acquisition loans, SBA lenders will still require a buyer to put 10% – 20% equity into a project so the buyer has “skin in the game.” The SBA requires 10% down, but some lenders may have higher minimum down payment requirements.

 

“Pre-qualifying” for car wash financing

Often, entrepreneurs contact wishing to be pre-qualified for an SBA loan. This is done because a seller and/or his business broker wants to know that a potential buyer has the financial wherewithal to close on a transaction before the seller spends significant time processing buyers’ and bankers’ due diligence and document requests. Pre-qualifying for a business loan involves an initial assessment by a lender to determine whether a borrower meets the basic criteria to potentially qualify for a loan. Pre-qualifying is a preliminary step to facilitate discussions. Pre-qualifying is non-binding on the bank and the borrower and does not guarantee that a bank will close on a loan. However, pre-qualifying does provide comfort to buyer, seller, and banker that a potential transaction is viable.

 

Benefits of owning a car wash business

Steady and Recurring Revenue: Car washes often generate consistent revenue streams as people need to wash their vehicles regularly. Whether it’s through one-time customers or recurring memberships, car washes can provide a steady flow of income. One very hot trend we are seeing is buyers converting per visit business models to monthly recurring subscriptions, which can be incredibly lucrative for buyers who acquire car washes in the right markets.

Profit Margins: Car wash businesses can have relatively high profit margins given very low labor costs. Once the initial investment is recovered, the ongoing expenses, such as water, cleaning supplies, and maintenance, are generally manageable compared to other businesses.

Scalability and Expansion Opportunities: Car wash businesses can be scalable, allowing for potential growth and expansion. Owners can consider adding more bays, services, or locations to increase their customer base and revenue. Additionally, diversifying services like offering detailing, waxing, or additional vehicle maintenance options can attract a broader range of customers.

Low Labor Intensity: Depending on the type of car wash, the level of labor required can be relatively low. Automated or self-service car washes may require minimal staffing, reducing labor costs and potential management challenges.

Repeat Business and Customer Loyalty: If customers have a positive experience with a car wash, they are likely to return and become repeat customers. Building a loyal customer base can lead to increased revenue through word-of-mouth referrals and recurring business.

Resilience to Economic Cycles: Car washes are considered non-discretionary services, meaning that vehicle owners will still require car washes regardless of economic conditions. This can provide some level of stability and resilience during economic downturns. As indicated by the graph below from the U.S. Census, car washes are not materially impacted by recessions (the shaded areas). In fact, during and after the Covid-induced recession of 2020, carwash industry sales actually jumped considerably.

Environmentally Conscious Operations: Many car wash businesses strive to incorporate eco-friendly practices, such as water recycling, energy-efficient equipment, and environmentally safe cleaning products. Operating an environmentally conscious car wash can attract customers who value sustainability and support businesses that prioritize green initiatives.

Potential for Passive Income: Depending on the business model, car washes can offer opportunities for passive income. For instance, self-service car washes or automatic car washes with minimal staffing requirements can generate revenue even when the owner is not present.

Fragmented Industry: Large, national car wash businesses only comprise a small percentage of the overall market, providing small mom-and-pop operators an excellent opportunity to compete effectively in their local market.

 

How to apply for an SBA car wash loan

We help connect you to the best car wash lenders in the industry. Here are just a few of the top banks, credit unions and other financial institutions that are actively approving SBA loans for car washes. We also help connect you to SBA Preferred Lenders that are committed to quickly approving SBA loans for small businesses.

For example, for a SBA car wash loan of $1,000,000, the car wash will need to generate at least $110,000 in annual profits (revenues – expenses) to cover the loan payments.

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