Types of Financing For a Car Wash

As with any start-up business, capital can come from a number of sources. Loans are most often the primary choice as rates are decent and it is easier to access than going to investors. 

Here are a few sources for financing a car wash.

Bank financing - Banks are a primary source for accessing capital.  The bank can either fund your project internally or if there is too much risk they may require a SBA guarantee.  

SBA Guarantee - SBA loan applications are made through a bank. The SBA guarantees a loan to the bank, so in case the borrower defaults, the bank is guaranteed a portion of the loan by the SBA. (You are still liable for the loan, so your obligation does not go away)Keep in mind that the SBA does not provide financing which is a popular myth but the give the bank a guarantee that if the loan does not get paid back, they will reimburse the bank for a percentage of the loan.  The SBA and other government programs provide subsidized loan guarantees that relieve the bank's risk in a project which increases your chances of getting funded. 

Lines of Credit: This is a pre-approved loan that allows the company to borrow for short-term fluctuations in the business or for purchasing inventory without having to dip into the companies reserves. 

Micro Loans - Many cities, towns, counties, chambers of commerce, etc have money available to lend to small businesses that are creating jobs.  For every full time job created you are allowed to borrow a certain amount of money depending on the program. 

Friends and Family - Another option for borrowing money to start your car wash is from friends and family.  Any repayment plan can be established but make sure everything is in writing to keep peace with the person loaning money and should the IRS inspect your records, everything needs to be documented. 

Venture capital - is another option which can come from family, partners, or even venture capital firms (not that many venture capital firms will even look at financing a car wash) . This money can be hard to come across unless you have good connections with people that have money to invest.  In addition, while the money may seem cheaper than a bank, meaning you don't have a monthly payment, you are selling a piece of the business and over the long term can be expensive.  Another cost is that when someone invests in your business you have someone to answer to and they may want a say in how the operations are ran, which may limit your freedom in running the business. 

Leasing - A portion of your car wash financing may include equipment leasing.  Leasing can be a good source of financing if you are short on funds or want additional manufacturer support.  Leasing institutions will typically require a detailed business plan that will include proposed equipment quotes and projections of revenue and costs. Your equipment supplier should be able to provide much of this information.