Car Wash Feasibility Study in Minnesota

Modest volume, modest loans

Minnesota car wash lending is lighter than the national pattern on two counts. The location quotient is 0.58x, so the class is a thinner slice of Minnesota lending than of the national book, and the median loan of $560,000 is only 0.60x the nationwide figure for washes. The SBA approved 60 loans and $63.0 million between FY2017 and FY2026. Minnesota is 17 of 53 among states and car washes are 21 of 39 inside the state. Typical loans span $220,000 to $1.3 million. Cold-climate operators here appear to build and buy at smaller scale than the tunnel-heavy markets elsewhere.

A heavy 504 share and who funds it

Real estate financing plays a large role: 37 loans use SBA 7(a) and 23 use SBA 504. Twin Cities-Metro Certified Development Company tops the 504 list on 9 loans and $12.3 million, a high per-loan average. In 7(a), Old National Bank holds 5 loans worth $9.1 million. Franchising is rare, at 5.0% of loans. Anoka and Hennepin counties each have 10 loans, Wright has 5, and Dakota and Sherburne 4 each, so growth suburbs north and west of the core account for much of the activity. Mobile washes and truck washes are folded into the same industry code as car washes.

Cancellation and the withheld loss rate

The cancellation floor is 6.0% for approvals through FY2024, with an upper bound of 8.0% counting undisbursed loans. Compared with some other states, that is a low drop-off, suggesting that Minnesota car wash projects usually close once approved. Loss experience is not printed for this cell. Too few loans funded in FY2017 to FY2021, under 30, and a blank here is never a zero. Because winter cuts volume sharply, lenders should look at how a borrower funds the slow months.

Where a Minnesota study must dig

Weather is the central test. A Minnesota study has to model wash counts by month, with sub-freezing weeks, road salt demand and the pull of free-standing tunnels against in-bay automatics, then check debt service coverage in the weakest quarter rather than the yearly total. It should price water reclaim, utility connection and equipment against loans near the state median, and check zoning and traffic at the specific corner. The appraisal needs to separate land and building from equipment. The approved-loan record on this page lets sponsor and lender ground their numbers in one source.