Environmentally-friendly car wash expands with financing

A collaborative effort with support and information provided by the Cleveland District Office of the Small Business Administration and editorial work by the staff of Toledo Business Journal.

When the recession hit, both Mark and Nikki Meyers knew they had to reconsider their career paths. Mark worked in steel sales and Nikki was a private school teacher. They realized that financially they were vulnerable, and wanted to start their own business to obtain self-sufficiency. However, they weren’t sure what kind of business to begin. They wanted to do something unique and marketable, and so began their search.

Nikki, originally from Detroit, Michigan, was aware of a type of car wash available in that city that was not available in Toledo. It had a low base price point and was fast – only three minutes long, as well as offering free vacuums to customers. The couple became enthusiastic about investigating whether or not they could start a similar car wash in the Toledo area. Mark did homework on the industry, and even went to a “Car Wash College” in Florida. Protecting the environment is important to the Meyers as they have incorporated technology in each of their car wash locations that has earned them the Watersavers® recognition from the International Carwash Association (ICA).

The couple found a dilapidated gas station on the south side of Toledo. According to Mark’s research, this area held excellent potential for success as an auto wash. The City of Toledo was helpful and provided assistance in rezoning the property, however, even after several tries, the Meyers were not able to obtain conventional bank financing for the auto wash.

The couple obtained a Small Business Administration (SBA) 7(a) guaranteed loan, which may be used for a wide variety of purposes, including the purchase of land and equipment, as well as the establishment of a new business.

As they started their business, the Meyers saw immediate success. Within the first six months of operation, sales growth was beyond their projections, and in the subsequent three years of operation sales have grown exponentially.

Second location

Spurred on by their initial success, in 2015 the Meyers decided after more market research to open a new car wash in the Toledo suburb of Sylvania. They turned again to the SBA for financing of this location, this time making use of two 504 loans, financed through the Toledo-Lucas County Port Authority with Directions Credit Union as the third party lender. SBA 504 loans are specifically designed for the purchase of land and equipment.

The second auto wash took off even more successfully than the first, and the Meyers now have eight full-time employees and eight part-time employees across both their auto washes.

Third location

Things are going so well that the couple has taken out two more SBA 504 loans (both again for equipment and real estate and financed through the Toledo-Lucas County Port Authority with Directions Credit Union as the third party lender) and are building another facility in West Toledo at 2411 West Laskey Road near Tremainsville that is expected to open by the end of the year.

Laurie Cantrell, financing programs manager, Toledo-Lucas County Port Authority, noted that the Meyers’ business plans showed that the financing provided by the 504 loans were critical to the business.

“The borrower would not have been able to get financing without the SBA 504 loan. Car washes are considered riskier businesses, and the borrower wanted to lock in long-term interest rates. This is very important to borrowers to be able to know what their payment amount is going to be 10 or 15 years down the road, especially with the current environment of increasing interest rates. It was very important as it allowed them to obtain financing with these long-term fixed rates. There will be no increase in the interest rate or payment amount as is the case with variable rates. The only out of pocket fees for the SBA 504 loan are a $500 application fee and closing costs, such as title insurance, filing fees, attorney fees, etc. The SBA fees are added to the loan amount and financed,” said Cantrell.

When discussing the role the Port Authority and Directions Credit Union played in the financing, Cantrell said, “SBA 504 loans require a bank or credit union to participate in the financing. The lender does 50% of the project costs in a first lien position and the SBA does 40% of the project costs in a second lien position, or 35% if it is a start-up business or single purpose business. The borrower only needs a 10% equity injection or 15% if it is a start up or single use business. The 504 allows the borrower to receive financing with a lower equity injection than what is required for traditional loans. Traditional bank financing usually requires 20% to 25% equity injection.”

“We wouldn’t have our businesses if it weren’t for the SBA,” said Mark Meyers. “We are very grateful.”

According to Cantrell, the borrower supplies the same information required for traditional bank financing, however, the Port Authority does a lot of the work required for a small business to acquire prospective financing.

She also concluded by explaining that the SBA 504 loan is an excellent way for a borrower to lock in long-term fixed interest rates with a lower equity injection.