Securing an Auto Repair Shop Business Loan
If you’re opening an auto repair shop, you probably need a small business loan to manage your cash flow or deal with emergencies. During this guide, we’ll address everything you need to know about the auto repair business loan and grants for auto repair shops.
What Can You Do With an Auto Repair Shop Business Loan?
Automotive business funding can be used in a variety of ways, including:
- Purchasing equipment. The barrier to entry in automotive maintenance can be expensive, and this is especially true if you want to be competitive with cutting edge competitors. With mechanic shop financing, you can purchase all of the high-quality equipment that will facilitate you in opening an auto repair shop.
- Opening the shop. If you’re a trailblazer planning to open your own shop, or if you’re already in a partnership and simply want to take full control, you can use a secured auto repair loan to get the capital car shops require for success.
- Training and hiring staff. You can also use a personal loan for car repair shops to hire your employees, train them, and pay your employee salaries.
Loan Considerations
When thinking about applying for grant mobile auto repair loans, you should consider the following about your business:
- Is the money needed right away?
- Do you need a lump sum, or will installments suffice?
- What is the entirety of your capital requirement?
- Do you plan to pay off the loan short term, or do you need more time?
Types of Loans for Auto Repair Shops
Listed below are some of the more common loans for auto repair shops:
Equipment Financing
Equipment financing is the way to go if you’re looking to tool-up your operation from the ground floor. Oftentimes lenders will finance you the entire cost of equipment if you’re able to provide them with an estimate of your costs from a trusted source. One of the major draws to an equipment loan is that it is self-secured, meaning that the collateral and the equipment are considered one in the same. This can be crucial for businesses that are just starting out, as every penny counts, and in most cases new businesses might not have established credit.
SBA 7(a) Loan
An SBA loan is a great avenue for businesses that already have established their credit, and also don’t need the money immediately. Although these loans are competitive, if you qualify you’ll enjoy many perks including attractive terms, higher loan amounts, low interest rates, and longer payback time frames. These loans also have the luxury of being backed by the U.S. Small Business Administration for up to 85% of the loan amount.
Bank Term Loan
Bank term loans are issued by a bank and usually have long-term repayment plans, which extend beyond one year. These types of business loans typically come with fixed interest rates, allowing banks to distribute funds in a way similar to business lines of credit. As a business owner, you can use a bank term loan to draw funds as you need them. You must pay a fixed amount based on the remaining balance.
Business Line of Credit
Another option businesses have is a business line of credit. Think of this as somewhat of a hybrid between a credit card and a traditional bank loan. Lines of credit are applied for and approved based on specific criteria, and once you’re approved you can withdraw up to a predetermined amount. You pay interest on any outstanding balance that you carry.
Business Credit Card
Business credit cards are probably the most similar option to consumer cards, which you’re likely already familiar with. This is a great option for businesses that don’t have a proven track record yet, and they can start small and grow as the business grows.
Tips for Getting an Auto Repair Business Loan
Even if you are mindful of your spending and also keep a savings account, unforeseen circumstances can lead to a need for additional cash. Keep the following tips in mind when you’re considering a business loan:
- Is your credit in good standing?
- Will a seasonal peak in demand influence your need for capital?
- Is liquidity a problem at certain time intervals?
- What is your operating income each year?
- How long have you been in business?
Applying for an Auto Repair Shop Business Loan
The application process for auto repair shop loans usually depends on the lender’s requirements. Most lenders require extensive documentation, including proof of income, a business plan, and a list of the current assets in your business. The lender will also check your personal and business credit scores, and they will want to know how long you’ve been in business. Once you have all the documents together, you can start looking into different lenders.
Keep in mind that applying for a business loan for your auto repair shop isn’t always a quick and easy process, especially if you’re going through a credit union or bank. Many businesses find it faster and simpler to use an online lender or secure a business cash advance.
If you need more advice on getting an auto repair shop business loan, contact L3 Funding for help financing your business.