SBA 504 Car Wash Feasibility Study in California

California car wash lending is expensive and fragile before funding

By 504 car wash loan count, California takes second place nationally, and car wash is 10 of 39 among the classes California lends to. In the decade FY2017 to FY2026 SBA approved 99 loans, worth $168.2 million in gross dollars. Two measures separate this cell from the class nationally. First, size: the median loan of $1.7 million is 1.51x the national 504 midpoint, and the central half runs from $983,000 to $2.2 million. Second, and more unusual, is cancellation. Cancellation after approval is at least 29.6% for FY2017 through FY2024, and reaches 42.3% when loans still undisbursed are counted too. Franchising is rare at 3.0% of loans.

A withheld rate and the lender table

California's early-cohort loss rate is held back here because the count of funded loans is under 30, and a rate is not shown by Loan Analytics' own rule for any such cohort, so it is neither a zero nor an estimate and readers should infer nothing from its absence. The holders below service the second loan of 504 packages; they are: The Mortgage Capital Development Corporation appears at 18 loans and $31.7 million, Bay Area Employment Development Company at 16 and $32.2 million, AMPAC Tri-State CDC, Inc. 13 and $28.0 million, Business Finance Capital 11 and $14.1 million, and CDC Small Business Finance Corp. 9 and $13.8 million. Those rows show the holder SBA lists today and carry no claim about any company's standards.

Where the loans are

Los Angeles County has 33 of the loans, far ahead of Orange with 10, San Bernardino with 9, Riverside with 7 and Kern with 5, which concentrates the activity in Southern California counties. Annual dollars show a pipeline that has not collapsed: $6.3 million in FY2020, $24.7 million in FY2021 and $30.4 million in FY2026, a complete fiscal year.

Proving a California car wash before the loan

A cancellation floor this high means a study should prove the project is deliverable before it discusses returns. Entitlements, environmental review, water and sewer capacity, and the local approval record for drive-through formats come first, with the progress of each spelled out in the proposal. One shared code spans stationary, truck and mobile washing, so tunnel formats cannot be told apart from smaller ones here, and the proposal must define its own. Demand analysis has to count the traffic on the site frontage, existing automatic washes in the surrounding drive-time area and the effect of any local water restrictions on operations. Costs should split land, building, equipment and reclamation systems because the appraisal treats them differently, and the payment needs to be shown covered if construction takes longer than planned. A loan well beyond the middle half deserves comparable evidence of sales volume from similar California sites.