Loan questions

[0616user]

Hello everyone,
I am looking at purchasing a car wash and am wondering about the loan process. One thing I know is that if we were going to buy a second home (either as a vacation home or rental property) we would qualify for over $450,000. This is based on our current loans costing us $1700/month (home, car, etc.) and we make about $150,000/year. We would both continue working, so our personal income would stay the same. Our credit is excellent (fico scores over 800). The current owner has horrible books. I have evaluated the site and am confident that paying anything less that $450,00 would be a fair price, but I don't think his books could support it. How much information about the actual income of the property would I need for the bank, if my income from other personal sources are sufficient to pay the loan? Would I be able to qualify for an amount similar to the $450,000 we would qualify for buying a second home if we have little proof of income for the property? Thanks for your help!

 

[robert roman]

Since recession banks shifted emphasis of loan approval process to market and management viability.

This means excellent market opportunity and principal’s management and ownership experience.

Current net earnings or free cash flow in a business allows a potential buyer to determine true investment value of the business.

If horrible books prevent reconstruction of income and expenses, there is no way to determine goodwill value in the company.

On the other hand, a guide to “test” the value of a wash is a multiple of gross sales.

Same problem exists here though horrible books.

So, most bank loan officers would find there is a lot of qualifying information missing.

 

[Waxman]

The bank needs the numbers to support the loan, period. They don't really give loans to existing car washes in any other way that I know of.

 

[Ghetto Wash]

It's been a few years since I've got a loan, but when I did the banks wanted 1.3 to 1.5 times loan coverage.

In other words, for a $1000 loan payment, the wash would have to SHOW a profit of $1300 to $1500 a month to cover the loan payment.

 

[cap732000]

My experience is IF your personal income can support it they can do a lot with that I went thru a similar instance when I bought my first wash. But like waxman says those numbers are key in most instances! I don't know how many times I've heard "we'll our taxes don't show exactly what it makes" we'll the bank don't care. On my lastest I was as to do a work up sheet on additions to be made to wash and how I was going to raise the gross income. I have a really good banker too he goes the extra mile!