The auto repair industry faced a decline during the recession. However, in just the last few years, the auto repair industry has not only experienced a comeback but has continued to grow.
Consumers, keen on saving money, are driving their cars longer, and that means auto repair shops will greatly benefit. Business loan lenders are also well aware that almost 75% of aftermarket car repair is carried out by independent auto repair shops.
In order to take advantage of this massive opportunity, now and in the future, auto repair shops need to have the funds to meet these needs.
Why Get A Small Business Loan?
In order to have a thriving business, there needs to be adequate cash flow. This is used to cover payroll, marketing campaigns, inventory, and other financial obligations that are necessary for everyday operations.
Regardless of whether you are just starting out, or looking to draw in new customers and increase revenue, seeking a small business loan for your small mechanic shop can give you the necessary boost in the capital you need.
Additional ways that your small business loan can be used include:
- Hire and train additional staff
- Buy more tools and equipment
- Expand your services
- Invest in new technology
- Teach current employees new skills
What Business Loan Options Exist For Auto Repair Shops?
In order to choose the right financing option, you will need to determine what you will use the funds for. It will also depend on how your business generates revenue. Since your business generates revenue from a wide range of customers, you might seek a loan in order to upgrade or maintain your current car repair tools. The ideal would be to seek financing that specializes in equipment.
Here are more options to consider:
- Merchant Cash Advance
This is a one-time loan that you can pay back by using a percentage of your everyday sales. If things get slow, but you are still generating business, a merchant cash advance can inject additional working capital to carry you through.
- Invoice Factoring
How this works is that you sell your open invoices at a discount. When your customers pay you, the funds go directly to your lender, instead of you.
- SBA Loans
Another option is to get a government-backed commercial real-estate loan. The Small Business Administration (SBA) guarantees as much as 75% of SBA 7 (a) loans of over $150,000 and up to $5 million.
- Equipment Financing
If you are in the market to purchase a specialized piece of equipment, it is best to seek out a loan that is “secured by what you are purchasing”. Usually, a better interest rate is offered.
How Do I Apply?
There are a variety of criteria that lenders could request from their borrowers. Regardless of where you apply for your loan, here are a few basic documents that you will need to present to lenders:
- Proof of income and revenue – Ensure that you have bank statements, tax documents from the prior year, or other “official documentation” as proof of income. This is to prove your ability to pay.
- A detailed budget – In order to convince lenders, you must show evidence of your ability to both plan ahead and draft out achievable goals. SBA loans do request that you have a detailed plan to present to the loan officer, instead of a budget.
- Personal documents – To prove who you claim to be, bring your government-issued ID and other identifying documents.
New auto repair shops require an investment of both time and money to get up and running. Existing shops want to expand their customer base and increase their revenue. Both of these scenarios can be supported by getting an auto repair shop loan to get that extra boost of capital they need.