Overview
Inflation can affect car wash financing by increasing construction and equipment costs, raising operating expenses, and changing how lenders underwrite cash flow. For acquisitions, inflation may show up through higher utilities, repairs, and payroll. For new builds, it can influence the total project budget and the amount of equity required.
Higher project budgets for new construction
When materials and labor costs rise, construction budgets expand. Lenders typically want complete, realistic budgets with contingency, and they may be less comfortable with tight budgets that have limited room for overruns.
Operating expense pressure in stabilized washes
Inflation can increase utilities, chemicals, parts, and maintenance labor. If expenses are rising faster than prices, net cash flow can compress. Lenders may underwrite with normalized expenses that reflect current conditions rather than last year’s numbers.
How lenders respond in underwriting
Lenders often become more conservative when inflation is volatile. They may size loans using lower cash flow assumptions, require stronger reserves, or prioritize deals with clear performance documentation and stable membership revenue.
Borrower actions that help
- Use current expense data rather than outdated assumptions
- Show vendor stability and maintenance planning that protects uptime
- Build contingency into construction budgets and keep liquidity reserves
- Document pricing strategy that supports margin without hurting demand
Bottom line
Inflation affects financing through higher costs and more cautious underwriting. The strongest borrowers present realistic budgets, current expense trends, and a clear plan to protect cash flow.