In a recent article from Professional Carwashing & Detailing titled “Understanding construction financing for carwashes,” contributor Jeff Rauth looks at the loan process from the other side of the lending table: the bank’s point of view.
Rauth describes how banks look at carwash sites, how they determine various projections and what information they are looking for before deciding whether or not to provide a loan. One thing Rauth notes is that banks are going to compare their projections with yours, and one of the projections you will need to determine is potential cash flow.
Rauth provides the following example of how to determine potential cash flow:
“For example, if 30,000 cars drive by your site per day, you are open for business 260 days a year and your capture rate is 1.25 percent, that means you should wash 97,500 cars per year. If you multiply this by your average ticket of $8 per wash, then you should gross $780,000 in sales for the year. If your margin is 38 percent, that means you should have $296,400 of cash flow for your profit and to pay your mortgage. This level of cash flow would support a loan amount of approximately $3,000,000.”
PC&D has created an infographic with the formulas to help you determine your own potential cash flow.
You can also download the infographic here.