Overview
Ground up car wash construction loans are designed to fund the build phase of a new car wash. These loans differ from acquisition loans because they rely on plans, budgets, and sponsor strength instead of historical operating performance. The lender is underwriting execution risk and timeline risk.
Key underwriting inputs
- Complete construction budget including soft costs and contingency
- Construction schedule with realistic milestones
- Contractor and vendor strength plus scope clarity
- Site fundamentals such as access, traffic patterns, and utilities
- Sponsor experience and liquidity to handle surprises
How draw schedules work
Construction proceeds are typically advanced in draws based on work completed. Lenders verify progress before funding each draw. Sponsors should plan for timing gaps between contractor invoices and lender inspections.
Contingency and cost overrun planning
Cost overruns are common in construction. Lenders expect a contingency reserve and a plan for how overruns will be covered. Projects with thin contingency often stall, which increases lender risk and delays completion.
Interest carry and project cash needs
Interest accrues during construction. Sponsors should plan for interest carry and other non-construction costs such as insurance, taxes, and utility setup. Adequate liquidity is one of the most important approval factors.
Takeout financing after construction
Many construction loans are refinanced into longer-term debt after the wash opens and reaches stabilized performance. A clear path to takeout financing improves lender confidence at the construction stage.
Bottom line
Ground up car wash construction loans are strongest when the budget is detailed, the schedule is realistic, the sponsor is well-capitalized, and the plan to refinance after stabilization is clear.