SBA 504 Car Wash Feasibility Study

Where 504 car wash approvals fall away

SBA's 504 files record 997 car wash loans approved from FY2017 to FY2026, worth $1.21 billion in gross approvals. What separates it from car wash lending across both SBA programs is how often an approval never becomes a funded loan. Of the FY2017 to FY2024 approvals, at least 16.5% were cancelled, and if every approval still waiting on disbursement were to cancel as well, the share would reach 21.9%. The 7(a) car wash record cancels less often, and the 504 car wash rate also stands apart from 504 lending across every class, so the pattern belongs to this pairing of program and asset.

The median 504 car wash loan is $1.1 million, and half of all 504 wash approvals fall between $564,000 and $1.7 million. Loans of that size usually carry land, a building and wash equipment together, the project shape the 504 structure was built for: a bank's first lien, a certified development company's second lien and the owner's equity. Only 5.0% of these loans went to franchise operators, so a lender usually judges the site and operating plan without a franchisor's record behind them. Florida First Capital Finance Corporation, Inc. holds 107 wash loans worth $158.2 million, and Florida Business Development Corporation holds 55 worth $69.3 million. Mountain West Small Business Finance follows with 41, The Mortgage Capital Development Corporation with 40 and Capital Certified Development Corporation with 37. Florida leads the states with 144 loans, ahead of California at 99 and Texas at 94.

Funded car washes have held up

The charge-off floor for loans disbursed from FY2017 to FY2021 is 1.00% across a cohort of 402 loans, and 0.75% failed inside the first five years after approval. Each can only rise as SBA logs later car wash charge-offs. For a borrower, then, the expensive outcome in this record is the deal that dies between approval and closing, after months of appraisal, environmental and design work. SBA's files do not say why an approval cancels, so the study's job is to close off the causes a lender can see coming.

What a 504 car wash study has to prove

A feasibility study for a 504 car wash has to measure traffic and access at the site and map the competing express and full-service washes in the trade area, then test whether a membership base can carry the payments through a slow, wet season. It has to price the building, the tunnel equipment and the water reclamation system against current bids, since a cost gap found after approval is one plausible route to cancellation. It has to show debt service coverage on both the bank loan and the CDC debenture at conservative wash counts. And it has to support the appraisal: a special-purpose building is valued largely on its income, so the study's revenue case and the appraiser's should agree. One caveat on the data: SBA's industry code does not tell a tunnel wash from a truck wash or a mobile wash business, so some of these 504 loans may be truck or mobile operations.