Using Section 504 Loans to Construct or Acquire Car Washes
SBA 504 loans could be an excellent option for them to acquire the capital they need to build their own self storage facilities.
With over 63,000 car wash facilities in the US (and growing) and over $15 billion in annual revenue, getting into the car wash business has never been more lucrative.
Car washes are capital intensive businesses, though, and financing can be costly and difficult to arrange. Thanks to the Small Business Administration, would-be car wash owner/operators can finance their acquisitions using the SBA 504 loan program.
Read this case study to find out more.
HOW CAR WASH FACILITIES OWNERS CAN USE SBA 504 LOANS
The SBA 504 loan program is designed to finance the acquisition, improvement, and construction of new commercial buildings, in addition to financing the purchase and improvement of existing commercial properties.
SBA 504 loans are perfect for owners of car wash facilities or those looking to purchase one.
You can construct anything, from the most fundamental car wash unit to the most advanced spot-free and automated car washes, using the proceeds from this loan. You can also use SBA 504 loans to erect security fences and safety monitoring systems, in addition to using them to acquire any long-term equipment that your car wash may need in the future.
THE BENEFITS OF SBA 504 LOANS FOR CAR WASHES
Owners of car wash businesses love SBA 504 loans because the interest rates on these loans are fixed and have substantially lower interest rates than traditional SBA 7(a) loans. If you plan on holding the property for the long run, the SBA 504 loan is clearly the winner; however, if you are buying a value-add type of facility, then an SBA 7(a) may be worth taking a look at. There are pros and cons to both loans. Your best course of action, then, is to run your scenario by your qualified mortgage advisor.
What makes SBA 504 loans attractive to car wash owners is their low rates & fees, coupled with their ability to help business owners improve their properties.
THE RESTRICTIONS OF SBA 504 LOANS FOR THE CAR WASH BUSINESS
On the other hand, it is essential to keep in mind that using SBA 504 loans is limited to the acquisition, improvement, and construction of commercial real estate, as well as the purchase of long-term equipment (defined as equipment that will be in use for at least 10 years.) Loans under Section 504 can't be utilized for operating capital (i.e., to pay temporary costs, such as marketing, disposable equipment, employee salaries, utilities, or general business expenses).
If you are in need of a loan for working capital, you should consider applying for a loan through the SBA 7(a) loan program or another SBA loan, such as the SBA express loan or even an SBA microloan. Both of these options are offered by the Small Business Administration.
Get the Help You Need
If you'd like to book a call to discuss your options in financing the construction or acquisition of a self-storage unit, click here.