The Best Small Business Loans for Auto Repair Shops
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Cars are an everyday part of life. People use them for business and for pleasure. Most families have two vehicles, one for each adult. Even then, some families with older children have more than two, depending on the needs of each individual. Then there are vehicle fleets used by companies to be considered. Cars are necessary for most people, and as such, so are maintenance and repairs.
Do you currently own an auto repair shop? Are you considering opening an auto repair business? If so, you may want to look into small business loans for auto repair shops.
The Ebb and Flow of an Auto Repair Shop
As with any business, auto repair shops will experience times of both high and low volume. The amount of customers that an auto repair business has directly impacts cash flow, and during slower times immediate cash relief may be necessary for several issues:
- Payroll
- Equipment upkeep
- Parts and supplies
All of these issues are valid reasons for needing a business loan. When it comes to applying for an auto repair small business loan, there are a few options available.
Small Business Loan Options for Auto Repair Shops
Depending on how you intend to use the funds you receive, there are a few options available for loans available to auto repair shops. Read about the 4 available options and what they’re used for.
General Business Loans
If you need a business loan for general purposes, a general business loan will suit your needs. This is the most flexible type of loan listed here, not having strict requirements like equipment loans or supply loans. A general business loan will suit the needs of many established auto repair shops, along with those that are just getting started. It will help cover the costs for the location and utilities of the business, as it gets on its feet.
Equipment Loans
Equipment loans are intended for auto repair shops that are just starting out, or shops that need to replace the necessary equipment to allow the business to function. Auto repair equipment is often very expensive, as much of it is specialized and complex. However, auto repair shops need the equipment to function, so high prices are typical.
Equipment loans are essentially installment loans, where you’ll receive the requested sum of money at the time of approval, then pay the lender back in monthly portions. The equipment being purchased will normally be used as collateral, eliminating the need to provide anything for collateral.
Tool and Supply Loans
These loans differ from that of equipment loans, as they are intended to be used for general supplies and smaller tools found in auto repair shops. A mechanic will typically spend around $10,000 on a tool box, tools, and supplies when they’re just getting started in their business. Tool and supply loans can help cover that high initial cost and let new mechanics and auto repair shop owners pay it back over time.
A Revolving Line of Credit
This type of loan is the most similar to a credit card. It lets auto repair shop owners draw from it on a need-to basis rather than granting access to the entire loan amount at one time. This is a great loan for auto repair businesses that need to manage cash flow during slow times of business. Just like a credit card, you pay back what you owe on a monthly basis, and as the line of credit is paid on it becomes available again.
Applying for Loans for an Auto Repair Business
If you need to apply for a small business loan for your auto repair shop, then you’ll need to have a few things in order before you can get started.
A Business Plan
If you’re looking to take a loan out so that you can start an auto repair business, you’ll need to have a solid business plan available for lenders to review. Business loans for auto repair shops will lean heavily on a solid business plan to get started. Experience in the industry helps as well.
Extensive Documentation
In addition to a business plan, auto repair shop small business loans will require documentation regarding both the business and the business owner. Expect to have all of the following ready when applying for funding for an auto repair business:
- Proof of income and revenue
- A detailed budget
- Documents regarding your current assets
- A government ID and other personal documents
Information Regarding the Loan’s Intended Use
If you’re applying for a specific loan, like an equipment loan or tool and supply loan, you’ll need to have the figures surrounding the reason you’ll be taking the loan out. Equipment and tool costs and details will be required, as well as the reasoning as to why you’ll need them. This is especially true of equipment loans, as larger pieces of equipment can cost in the tens of thousands of dollars.
Tips for Applying for an Auto Repair Shop Loan
When you’re shipping around for an auto repair shop loan, be sure to follow these tips. They’ll help you ensure that you’re taking out the right loan.
- Know how much you need, and avoid taking out a loan for any more than that.
- Know how quickly you want to pay back the loan.
- Estimate the cost of the loan itself, and determine if you’ll be able to pay it back in addition to the principal in a timely manner.
- Review the eligibility requirements of auto repair shop loans available to you, and avoid applying for any loans that you may not qualify for.
If you follow these tips, you’ll be able to secure a loan that makes sense for you, as well as avoid any unnecessary hard credit pulls. To start your application click here.
Key Takeaways
Auto repair shops are a necessary business in most communities, which makes a good case for opening an auto repair shop. If you plan on opening an auto repair shop, it’s likely that you’ll need to take out loans to do so. When taking out a loan, make sure that you choose the right type of loan, as well as one that fits your overall needs. Doing so will ensure that it can be used and paid back in a timely manner!
For more information on Auto Repair Shop Business Loans.
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3 Comments
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