5 Small Business Loans That Can Help Auto Repair Shops Expand Their Services
Written by
Vance Cariaga
Edited by
Daria Uhlig
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Auto repair shops are a cost-intensive business because of the space and equipment required, which means many owners rely on loans to help them get established and grow their business.
Loans to expand auto repair shops are typically used to address these needs, according to Upwise Capital:
- Purchase new equipment, ranging from heavy equipment like vehicle lifts and engine hoists to smaller gear such as battery chargers and jack stands
- Hire more staff, including salaries and training
- Software and technology such as diagnostic equipment, auto repair management software and recordkeeping software
- Marketing and advertising, which typically include media ads, new signage and website upgrades
- Cash flow to help fund items like payroll and accounts receivable while you expand your business
In terms of where to seek financing, auto repair shops can choose from the same types of lending options as most other small businesses. Here’s a look at five small business loan options for auto repair shops, according to the Small Business Funding website.
Bank Loan
This route typically has more stringent requirements than other options when it comes to credit score, credit history and revenue. You’ll also probably have to provide collateral to secure the loan, SBF noted. On the upside, bank loans often come with lower interest rates and longer terms than other options.
Term Loan
This is another traditional loan option provided by financial institutions and other types of lenders. Terms typically range from two to five years, according to SBF, and funding might be available in as little as four weeks. To qualify, you will likely need to have been in business for at least two years, have a profitable operation and have a personal FICO score of 640 or higher. Some term loans are approved for up to $200,000.
SBA 7(a) Small Loan
The Small Business Association offers these loans for up to $350,000, according to the SBA website. The maximum SBA guarantee is 85% for loans up to $150,000 and 75% for loans greater than $150,000. Lenders and borrowers can negotiate the interest rate, but it can’t exceed the SBA maximum. You might not need to provide any collateral with this option, according to Small Business Funding.
Business Line of Credit
This is a flexible funding option that provides access to money when you need it, up to the approved amount. You only pay the premium and interest on the portion of money that you withdraw, SBF noted. Approval amounts can range as high as $250,000. Typical requirements are six months in business, a minimum FICO score of 620 and yearly gross revenue of at least $300,000.
Working Capital Advance Â
This option usually involves a higher borrowing cost and shorter term, according to SBF, making it a good choice for those with lower credit scores and shorter business histories. You might qualify for a working capital advance after being in business as little as six months and with yearly gross revenue of $180,000. Working capital advances can range as high as $500,000.
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