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Today we're gonna take a look at really how to get started with your new project.
We're gonna look at how to fund the car wash itself. We'll give you some inside tips on how to make your job easier
We're also gonna let you visit with some of our car wash operators that have been successful in managing to start up
thier car wash with various methods of capitalization.
Lets begin by talking with a banker who's recently financed a car wash operation.
We're gonna speak with Kevin Rafferty from Co-America Bank.
The benefits of conventional financing are typically better interet rate, particularly a fixed rate of interest is available for
those who are desirous of a fixed rate. So lower interest rate and the ability to get a fixed rate.
There are a lot of challenges in financing a business. To getting a lender to say yes is probably the most difficult
But the paperwork can tend to be cumbersome.
it's time consuming & it costs money,.
There are some lenders who like the industry they were knowledgeable about today's trends & they get more
comfortable with the industry. what I like about the industry as a lender is that I can look at the location, the demographics,
the traffic counts, and I can have a highly predictable guess on what te revenues are gonna be
I know what the expenses are gonna be, so it's a very predictable industry from estimating revenues, expenses
and the ability to re-pay.
Kevin brought up a lot of good points and ofered some valuable insight into how banks can finance a new business.
Traditional bank loans might not be for everybody. Now SBA loans, they can be a tricky proposition
You're gonna hve to fill out a lot of forms, provide even more documentation. Well, Scott Blackstock of Todalwave Carwash
He accomplished this task. He opened his car wash in Atlanta, GA in 2004 with an SBA Loan.
Luckily i'v had a relationship with banks for a long time. Having your information ready & together, they want to see
a biography of yourself, explain how you qualified and what you will do.
Have some backup people. Banks are businesses, if you get run over by a truck or decide to go to the Bahmas, they
they want to know that there's somebody there that can step in and hanele it if you're not there.
Remember that a bank is a business. They're doing you a favor to loan you money. But you are their customer.
Really that's where they make their money.
The SBA is the small business administration & it is a government backed loan it is not a direct loan
A lender, a commercial finance company or bank, will lend you the money with a government guaranting a portion of that loan.
The benefits of lower downpayment combined with a longer amortazation on the loan combined with easier underwriting
The 3 most important things in real estate are location, location, location. In the financing industry
or the SBA industry, the 3 most important things are loan package, loan package, loan package.
Know exactly how much money you want to borrow, know exactly how it's gonna be paid, know the traffic count,
how the demographics, know what type of car wash works best in that facility, and why in that location.
know who's gonna be the manager, and have a lot of paper trail to memorialize your business plan.
Hopefully their credit is adequate it doesn't have to be excellent. But adequate & if they ahve all those elements put
together they'll generally meet with scussess.
Traditional banks loand and SBA loans have always been the most popular form of financing for most new car wash projects
Venture Capital firms are always the last resort for many operators. The perception was that if you couldn't get your
bank oan or SBA loan & you've exausted all other resources you had to go out looking for Venture Capitalists.
And, put a group together. Due to some new excitement within our industry we're finding that Venture Capital Firms
are being used more & more often in this new investor driven market.
Groups are coming together to work with Venture Capital firms to help develop and build locations within
We sat down with David Cots of HD Ventures in Nashville, TN to discuss how the venture captial approach really works
We of course we looked at SBA we look at traditional financing. Fortunately, a lot of our backgrounds had been in Venture Capital
or at least raising money from Venture Capitalists. We kinda kew what we were doin.
Car washing is difficult ,anytime to raise Venture Capital money, it's extremely difficult in the car wash business cause
these days basically it's been built on technology for the last 30 years and while there's a component that this is really a reatail
service business, so you have to be able to identify a VC that is willing to find a retail service business but there's a lot of
advantages obviously to raising money this way and we were fortunate enough that we in a network where we could do that
It's not all on your shoulders not personally guaranteeing loans from the SBA or whatever else
You also have a financial partner with you if you need more money, alot of times there's availability for that
And, you also have someone who has got years & years of experience to help guide you & help make decisions
You are answering to somebody else as opposed to just for yourself. The Venture Capitalists, it's a 10-yr partnership with
Trying to get Venture Capital & not find one that's willing to do it. Or, find one that you can come to tuersm with.
And there's along due diligence period, They really vette out. Management as well. And make sure you've got not only a
a sound business plan but also the pople in place and that's a 3-4 month process while they're doing background checks &
reference calls and things of that nature. Venture Capitalists is looking for high growth opportunities not gonna be satisfied
with a dividend from cash flows. They're looking for 25 to 35% compounded returns over 5 yrs. So, we can't just build a few &
pay ourselves & pay the VC. They care about capital gains. Not about cash flow.
Here a Sonny's we help hundreds of operators every year get their car wash project rolling.
We're constantly learning new tips from these customers everyday.
Here are a few more ideas that some of our customers & good friends inother industries are willing to share with you
in regards to getting financed.
Build to suit is a good option for people who are not financially stable enough to be able to go and buy their own property
and finance it. A lot of property owners have the property that they are willing to lease & a lot of times they're willing to do the
build to suit whether it be with cash that they currently have thata they just want a return on their investment.
Or, they actually go out and get their own bank financing. And, use the lease for that property as their collaterol.
And, it's a very good way especially for smaller operators to get started. And then later as they become more successful
they can go out and buy their own land & build their own building & move on down the road. But what we have found
over the years is that on some projects especially when the property price are so high we're better off doing a build to suit
because we can acutally get better lease rates for our company by having somebody that is a build to suit