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car wash - financing

what's my price range? i have about 100K in savings, 150K in equity, 500K in assets, 750+ credit and 200K annual income. I've been looking at car washes with property in 1.5 mil range. am I being realistic? what are the requirements?

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Answers (4)
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Jason - I have owned multiple business in the past twenty years and am currently trying to sell my core business with little success due to financing. Lenders will also be asking the following questions. Have you owned a business before? Have you owned a car wash before? Have you lived in the business community for an extended period of time? Will you have 100-200K in your business checking account for cash flow reserves? Loan officers seem to be optomistic until the deal gets to underwritting and the criteria gets much tougher. Lenders want buyers and sellers to assume greater risk now more than ever. Five years ago your senierio would be realistic, today it isn't.

Oct 11, 2009
Alexandra Simmer
United Community Bank
Asst. Vice President, Business Banking
Fulton County, GA

Jason, I can't say I disagree with Don and honestly there are several businesses that could be suspects of the same, you would be surprised. That is why I highly recommend the business be evaluated by a third party, you will find the ones that don't report earnings will most likely shy away at that point, saving you, the broker and lender the time. Consider a more of a high end automated drive through, they seem to thrive and earnings are a little harder to hide.

Oct 9, 2009
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The BAF Group LLC
MD

Jason, I am not second guessing Alexandra, who is obviously a Banking pro! But the biggest problem with financing Car Washes (in my experience) is that the Sellers routinely do not report a large portion of their income on their Tax Returns. That means that the Property may be good, but the business is not viewed as generating sufficient Cash Flow to pay for the Debt Service. That is the issue that has caused difficulty with most of the Car Wash deals our Business Brokerage has done, in the past. I would welcome Alexandra's comments on that.

Good luck.

Oct 9, 2009
Alexandra Simmer
United Community Bank
Asst. Vice President, Business Banking
Fulton County, GA

I would say you are right on the edge. From a financial perspective you appear to be healthy. Your down payment these days will be 10 to 20% dependent on the purchase price which will exceed the amount you have saved, wouldn't touch your equity in today's market if I were you. Credit score is very good and your annual income is excellent as long as your not leveraged too much; is your 500K in assets owned free and clear?? You want to make sure that the building appraisal comes back in the range expected most commercial properties are coming in 20-30% below value. Have the business evaluated before signing purchasing agreements most evaluations will run $2 - $3K. Consider your closing cost too... some banks will roll them in others won't it really depends on the LTV which will be based on the property and fixed assets. As far as the price range in mind I consider that to be a fair target. Might be more depending on location and established client base of course.

Oct 9, 2009

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