Overview
Collateral based loans are primarily sized around asset value rather than relying entirely on historical cash flow. In car wash lending, collateral often includes the real estate, the improvements, and sometimes certain equipment. These loans can be useful when documentation is imperfect or the deal is transitional.
What collateral typically includes
- Real estate such as the land and car wash improvements
- Fixed equipment that is permanently installed and integral to operations
- Additional assets when available, depending on the lender
How lenders size collateral based loans
Loan proceeds are often tied to a conservative view of value and marketability. Lenders may use appraisals, broker opinions, or internal valuation approaches. Even when collateral drives sizing, lenders still evaluate whether the borrower can service payments.
When collateral based loans make sense
They can help fund acquisitions with tight timelines, stabilize a property that needs repairs, or bridge a borrower to a future refinance. They are also used when cash flow is improving but not yet documented cleanly.
Why the exit plan matters
Collateral based loans are often shorter term or priced for flexibility. Borrowers should outline how the loan will be repaid, either through refinance, sale, or documented stabilization that opens up bank or SBA options.
Bottom line
Car wash collateral based loans can provide speed and flexibility when collateral is strong. The best outcomes come from pairing the loan with a clear plan to stabilize and transition to long-term financing.