Read the Finance Options Brochure

HOWCO, INC. stands ready to help you with your car wash needs-whether it is for new equipment, ordering supplies, requesting service or seeking advice. We can even provide some insight into the process of successfully obtaining financing for your car wash project.

Obtaining Financing for a Car Wash

TYPICAL LENDING REQUIREMENTS
Typically, lenders require business investors to be open to meeting face-to-face at site locations with potential buyers. HOWCO representatives are available to participate with you and your lender in conversations to discuss the logistics and certain specifics of building, owning and operating a car wash.

You may also want to consider leasing car wash equipment. Lease financing has fluctuated from very competitive to very tight and more difficult to arrange today. You may want to consider discussing leasing opportunities with your investors and lenders to obtain names and quotes. Nonetheless, this type of underwriting from a lending institution or leasing company will require some of the similar criteria:

To consider car wash financing, lenders prefer to finance "in market" within the same footprint as the specific location(s) where the car wash/principals live and will operate the business.

General issues related to operations are:
1. To what degree the principals will be involved in the day-to-day operations of the business.
2. What their experience is in the car wash industry and/or similar businesses. Lenders generally like for you to have a couple of years experience in the car wash industry.
Don't be discouraged if this is your first car wash; experience in a similar industry or with a successful retail operation may suffice.

Assuming these characteristics are acceptable, underwriting on typical financing may be broken down by land and building, equipment, and business acquisition or equipment financing.

Underwriting on Typical Financing
LAND AND BUILDING

• 75% debt/25% equity (based upon projected costs) for financing land and building. Generally a five year term on a 15 or 20 year amortization schedule.

• Loans over $1 million will require an appraisal. Loan to value ("LTV") of not more than 70% of appraised value. You may need to put in more capital to lower the LTV to 70% or below.

• Project Equity is the combined total of owner equity in the real estate required above plus owner equity in the equipment as noted below.

• Working Capital (current assets less current liabilities) is the money a business will have on hand to run the company after paying for the Project Equity.

• In addition to capital funds required to pay the Project Equity and provide Working Capital, the owners will need to demonstrate access to additional liquidity to support the business. General rule of thumb for adequate excess liquidity support is 20%+ of Working Capital.

• Depending on overall excess liquidity support, lenders may consider a higher LTV.

EQUIPMENT

• 65% debt / 35% owner equity with other criteria similar to above.

• Typical terms of five to seven years.

BUSINESS ACQUISITION OR EQUIPMENT FINANCING

• 65% debt / 35% equity with adequate liquidity as discussed above.

• Depending on collateral, a five to seven year term.

• Tangible assets as collateral such as equipment, other business assets or adequate outside personal assets.

• Possible available SBA 7(a) programs (Available from your HOWCO representative).

Preparations to Talk With Your Lender
Most all financial institutions will require information to process your request for funding. We suggest a face-to-face meeting with your banker to discuss your project in general terms. Once you have done this, in order for your lender to underwrite the potential transaction, you should be prepared to provide the following documentation to your lender. Delays in preparing these documents will delay almost any decision by the lender.

• Provide a description of your project.

• Create a Business Plan including year 1 monthly budgets, income and expense projections, initial capital expenditures, and a 3-year financial pro forma.

• Attach a preliminary site layout, demographics, and site analysis. Can be provided by your HOWCO representative.

• Provide literature of your equipment to be utilized, photographs of similar sites, and any information to give your lender a visual idea of your project.

• Provide a resume of the proposed owners.

• Personal financial statements of prospective owners and developers.

• With financial statements, make sure to include verification of liquidity of cash, any marketable securities, and other liquid assets that may be used for the initial equity and residual liquidity.

• Copies of the last three years personal tax returns of the prospective borrowers.

• Lenders are looking for acceptable credit history with no derogatory credit reports within the last seven years. If any, it is strongly advised to also provide a written explanation of the circumstances and why they won't reoccur.

• Lenders would like to know your business experience. Be sure to describe how HOWCO will support you with an startup operational training program, ongoing service and technical advice, and quality products to run your operation daily.

The above illustrates some general anticipated credit underwriting reviews based on the current credit environment. HOWCO does not directly provide or extend credit, nor can we represent the likelihood of any borrower to receive adequate financing. If you so desire, we may be able to provide some possible names and contact information of lenders in your area.

HOWCO personnel can assist you with the site analysis and input on cost projections. We would also be pleased to meet with your financial lender at the site and explain any projections we have provided. This is one of the benefits of doing business with HOWCO and we encourage you to sign the proposed retainer and provide the related deposit so we can begin working on your carwash project.