Automobile repair shop loans may provide mechanics and shop owners with cash to provide new solutions, buyout another shop, or expand the existing facility to increase revenue. The best types of automobile repair loans are short-term loans or a business line of credit because of their minimum qualifications, comparably reduced fees, and speed of financing.
OnDeck, which sponsored this guide, offers automobile repair store loans up to $500k. You may qualify if you’ve been in operation for at least 1 year old, have a 500+ credit rating, and also have 100k+ in annual business revenue. They can finance you in as little as 1 day. Get prequalified online in approximately ten minutes.
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Best Auto Repair Shop Loans
| Finest For | |
|---|---|
| Short Term Loans | Lump amount working capital funding to grow your auto repair shop company fast. |
| Business Line of Credit | Shops having to cover operational costs on a recurring basis. |
| Business Credit Cards | Best for all repair shops since it provides a small credit line to fund daily purchases such as inventory. |
| Equipment Loans | To purchase large pieces of gear such as a diagnostic system for new shops or to replace old equipment. |
| SBA Loans | Automobile repair shops that want to purchase a business or commercial real estate. |
How We Determined The Best Auto Repair Shop Loans
Auto repair shops continue to see an increase in the amount of work available since the average age of a car fleet has become 17 decades and the average car on the road is 11.5 years of age. Repair shops are helping these vehicles maintain their performance and keep them on the street as long as you can. Auto repair shops typically need financing to meet inventory demands and to grow their company, which were the main considerations for this article.
The full criteria analyzed when choosing the best automobile repair shop company loan includes:
- Auto Mechanic requires
- Loan amounts
- Repayment terms
- Prices
- Rate of financing
- Minimum qualification requirements
Auto repair shops can increase by increasing their marketing campaigns, expanding their center and service capabilities, or by buying out the competition. This means that you’ll probably need a substantial amount of funding (more than $50-$100k). The top options will give you an immediate capital increase and give you the breathing room necessary to repay the loan as you increase your company.
Automobile repair shops often find it hard to qualify for a traditional loan because of the unpredictability of the market, and you will probably need the money pretty fast. These reasons together with the maximum amount you can borrow are why we picked the brief term loan since the best funding option. With a short-term loan from OnDeck, you can borrow up to $500k and be financed as little as 1 day.
Short Term Automobile Repair Shop Loans
Short term loans offer you a lump sum around $500k you are able to get access to quickly, within 1-3 days. These loans can carry higher rates of interest and short repayment terms using daily or monthly obligations due until you’ve paid the loan off. These loans typically ask you to refund a predetermined dollar amount irrespective of how long you are in repayment however there aren’t any pricey origination or hidden charges, and the entire price of funding may be lower compared to a term loan.
A short-term loan can be a fantastic choiceif you need a fixed amount of working capital to cultivate your automobile shop and repair business. These loans are a great fit to invest on necessary expenses that will enhance your overall sales or gross profits. By way of instance, you can use the lump sum payment to rent out another location on account of the growth on your oil change company. In addition, it can be used to hire more mechanics should you have to increase your existing headcount.
Short Term Loan Interest Rates & Fees
The total costs for a Short-term loan will generally fall into these ranges:
- APR: 30 — 50%
- Prepayment Penalty: None
While many traditional lenders will charge you interest for the time you are in repayment, these brief term lenders actually charge you a fixed dollar amount when you borrow. It follows that even if you repay the loan early you will repay the same dollar amount, but there are no prepayment penalties.
Short Term Loan Terms
Short-term loans typically carry those conditions:
- Loan Amount: Up to $500k
- Repayment Period: 3 — 36 Months
- Repayment Cycle: Weekly
- Time to Funding: 1-3 Days
Short Term Loan Qualifications
To get a Short-term loan you need to meet these minimum qualifications:
- Minimum Credit rating: 500 (assess your credit score for free )
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $100k
What Is Missing From a Brief Term Loan
Short term loans are fantastic for stores needing growth capital, but they may be expensive if you require long-term funding to finance large purchases such as a new centre. These loans also come in a lump sum, so if you have recurring financing needs you are going to need to reapply every time you require additional funds.
The Way to Find Short Term Loans
OnDeck offers short term auto repair store loans of around $500k and may fund in as little as 1 day. You may get prequalified by filling out OnDeck’s online application that takes approximately ten minutes.
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Business Line of Credit for Auto Repair Shops
A business credit line (LOC) is a revolving line you can refund and use over and over again to fund recurring expenses for your vehicle repair shop. With a LOC, you won’t need to reapply each time you require additional financing and you will only be billed for the amount you currently borrow.
A business line of credit (LOC) is the perfect solution to help you purchase unique and costly components which you might not have on hand. For instance, as you might have a lot of brake pads and engine oil in the rear room, you might not have one-off needs like a drive shaft one of your customers broke in an accident. This is fantastic for drifting expensive parts while you complete the work and wait to get paid.
Business Line of Credit Interest Rates & Fees
A business line of credit will carry these costs:
- APR: 13.99 — 40%
- Prepayment Penalty: None
- Service Charges: Some lenders charge a fee if you don’t utilize your LOC in a particular timeframe (however OnDeck doesn’t ).
Having a LOC you only pay interest on the amount of the credit amount you use so if you don’t need right away for the full amount you’re approved for you do not have to pay interest on the credit line you do not use.
LOC Terms
A business LOC will generally fulfill those terms:
- Loan Amount: Up to $100k
- Repayment Period: 6 Months
- Repayment Cycle: Weekly or Monthly
- Time to Funding: 1 — 3 Days
Small Business Line of Credit Qualifications
To Be Able to get a small business line of credit you’ll need to meet these minimum qualifications:
- Minimum Credit rating: 600 (check your credit rating for free here)
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $100k
You may find out more about the minimum qualifications of a LOC by reading our guide on a business line of credit.
What’s Missing From a Business Line of Credit
A business line of credit is generally good for automobile repair shops because you don’t need to keep seldom needed inventory available and are ready financially for the unexpected. However, you typically won’t be accepted for more than $100k and the best rates can be difficult to qualify for if you are not a prime debtor.
Where to Locate a Small Business Line of Credit
OnDeck offers a LOC up to $100k at which you can get financed in as quick as 1 day. Prime borrowers can qualify for rates as low as 13.99% and you can begin the process by filling out their online program, which requires approximately ten minutes.
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Business Credit Cards for Auto Repair Shops
Company credit cards will help any automobile repair shop with their financing requirements and needs to be a part of every business’s fiscal plan. These cards are fairly easy to qualify for and they’re able to give you a credit line up to $20-$30k to use however you want. Plus, many small business charge cards take rewards that could help you earn cash back or points. Some even include a special offer of 0% interest for several months.
Business credit cards are fantastic for auto shops to use to buy known and affordable inventory parts or fluids you regularly keep in stock or to purchase retail items you are trying to upsell to your customers. Charge cards are fantastic for ongoing expenses like office supplies, garage insurance, and utilities, too. Possessing a credit line available once you need it’s also great in the event of any unexpected expenses, nevertheless a business credit card is for smaller funding requirements than the usual LOC.
Interest Rates & Fees
The costs associated with a business credit card normally fall into these ranges:
- Interest Rate: 12 — 29%, some have 0% introductory offers
- Annual Fee: $0 — $350+
Business Credit Card Conditions
The terms of a business credit card are generally:
- Loan Amounts: Up to $100k but typically less than $30k for many businesses
- Repayment Conditions: 30 days interest free
- Period to Funding: Instantly — two weeks (time it takes to receive your card)
- Initial Rewards: Introductory APR of 0% for 7 — 18 weeks
- Ongoing Rewards: Money back or points you can redeem for rewards
Many rewards are tailored to travel or office expenses therefore a repair shop is best off by getting as much cash back as you can. You could also try to acquire rewards in the pump and put fuel in the cars you service as an excess customer support attribute to drive customer growth.
Business Credit Card Qualifications
The minimum qualifications for a business credit card are:
- Minimum Credit rating: 650+ for best deals (check your credit score for free here)
Your annual business revenue can be factored into your approval but there are not any printed specific requirements you must meet. Rather, your earnings will likely help ascertain your approval amount.
What Business Credit Cards are Missing
Company credit cards are a good fit for virtually any auto repair shop, but remember that these cards carry small limits (generally more than $30k). Carrying a balance on your small business credit card can also be costly unless you’ve qualified for one of the cheapest rates.
Where to Find Business Credit Cards
Company credit cards are provided by large credit card companies and banks. You can learn more by reading our guide to the very best small business credit cards. You could even have a look at our article on the best small business credit cards for startup businesses.
Equipment Financing
Equipment financing comes in the form of an equipment loan or lease utilized to buy large parts of equipment with a very long shelf life. Typically, the lender uses the equipment you’re buying as collateral for the loan. These loans carry low rates of interest and repayment provisions of about five decades.
Equipment financing is excellent for auto repair shops that have to buy new gear such as a hydraulic unit or replace old equipment like a vehicle lift. Gear loans will not be able to help your store with the majority of your financing needs because you can only use the funds to purchase equipment and not for growth capital.
Interest Rates & Charges
Equipment loans normally carry these costs:
- Interest Rates: 6 — 9%
- Prepayment Penalty: None
Equipment Funding Requirements
Gear loans will generally have conditions that look like that:
- Loan Amount: $10k — $500k (up to 95 percent of equipment costs)
- Repayment Conditions: 2 — 7 years (normally 5 years)
Equipment financing can come in the form of financing or a lease. With a loan you’ll have larger repayments but you’ll own the gear at the end of your term. Equipment rentals are more cheap but you eliminate the equipment when your term is up if you don’t pay a large lump sum to then buy that equipment.
Equipment Financing Qualifications
You can generally qualify for equipment financing if you meet these qualifications:
- Minimum Credit Score: 600 (assess your credit rating for free here)
- Down Payment: 5%(10-20percent for owner-operators)
- Collateral: Financed gear
- Period in Business: 2Years (startups with industry experience might qualify)
What Gear Financing is Missing
Equipment funding is a great fit to purchase large equipment but it can not help you with any of your additional financing needs. Most auto repair shops are searching for financing to grow or conquer short-term cash flow interruptions so equipment financing is only going to help a very small amount of borrowers.
Where to Locate Equipment Financing
Equipment financing can be found at equipment dealers and traditional lenders such as banks. You may find out more about such loans by reading our final guide to equipment loans.
SBA Loans for Car Repair Shops
SBA loans are guaranteed by the SBA and typically offer you the lowest prices and maximum repayment provisions of any alternative available. Nonetheless, such loans require a long time to become financed and demand a lot of documentation. Having an SBA loan that you can borrow up to $5 million and make payments on the loan for up to a decade.
These loans take a great deal of fees that are wrapped up into your loan so that they’re typically not a good match for short-term borrowing.For auto repair shops, SBA loans will probably only be the ideal choice if you require a great deal of capital to buy a competitor or to create a new facility to your store. For example, if you are expanding into a second place due to the high regional demand for smog tests, then a SBA loan can help you get the funding for your building.
Interest Rates & Charges
The costs of an SBA loan may vary by lender but normally will look like that:
- Interest Rate: 5% — 10% (check current SBA loan prices )
- Origination Fee: 0.5 — 3.5%
- Loan Packaging Fee: $2k — $4k
- SBA Guarantee Fee: 3 — 3.5percent (Waived if loan amount is below $150k.)
- Prepayment Penalty: None and you are able to save yourself cash by paying it off first by lessening the amount of interest you’ll pay.
The fees associated with an SBA loan can be confusing but you can find out more by reading our post on the SBA guarantee fee.
SBA Loan Terms
Terms for an SBA loan will generally look like this:
- Loan Amount: Up to $5 million
- Repayment Terms: Up to 10 years
- Repayment Cycle: Monthly
- Time to Funding: 30 — 90+ times
SBA loans take a very long time (90 days or more) to get financed because of the underwriting requirements and documentation included. You may learn more about the SBA loan application procedure by reading our informative article about the best way to apply.
SBA Loan Qualifications
To qualify for an SBA loan you will need to Satisfy these minimum qualifications:
- Minimum Credit Score: 680 (assess your credit rating for free here)
- Collateral: Typically required
- Down Payment: 10-20%
- Time in Business: Startup — 2+ years
It’s pretty hard to get a company with variable revenue or a brand new startup repair store to become qualified. Luckily, we have an article about how best to obtain an SBA startup loan with more information.
What’s Missing With an SBA Loan
SBA loans are great for long term financing to buy a new business or to create a new facility but they can take a long time to become funded. On account of the length of time that these loans take to get financed an SBA loan is only going to work for if you’re having to finance commercial real estate. If you need working capital then you need to look at one of those other options.
Where to Locate SBA Loans
You can borrow an SBA loan from many traditional lenders, such as your regional bank. To locate your best choices you can read our article on the best 100 SBA lenders.
Keys to Getting Approved for a Car Repair Shop Loan
A good deal of auto repair shops do not have predictable income because so a lot of their services rely on vehicles breaking down or needing parts replaced. Even offering more predictable solutions such as oil changes can be tricky to predict earnings due to the amount of rivalry. It’s important that you know how to put your best foot forward on your loan program to maximize your chances at becoming accepted.
The 3 keys to getting a car repair shop business loan are:
1. Show Recent Sales and Margin Growth
Lenders will want to see that you’re growing your business. Being able to show 6 months or even more of continual earnings growth is a fantastic way to show a lender that your business plan is growing and you could use the capital to grow quicker. Automobile repair shops should focus on improving sales in the service areas of your company that make more money, like diagnosing and fixing engine issues.
You can use fresh or more effective advertising efforts to raise your overall sales or you can look at upselling your current clients when they are in for goods or services you do not make a lot of money from.
2. Improve Your Personal Credit
The greater your personal credit is the higher your likelihood of being approved for a loan. Obtaining your own personal credit rating to meet the minimum qualifications of this loan you’re applying for is only step one. To get the financing amount you want, it’s likely that you are going to need to significantly surpass the minimal requirements.
You can typically improve your personal credit score by doing these 3 items:
- Verify the accuracy of information on your credit report
- Make all of your credit obligations early
- Spend much less than your maximum approved credit
Having bad credit isn’t necessarily a deal breaker with alternative financing like short term loans. You ought to take a look at our article about the best credit repair organizations to locate a partner who can help you improve your finances opportunities.
3. Boost Your Margins
Many stores struggle since their gross profit just isn’t high enough. This can be due to ineffective operations or inaccurate diagnosis of vehicles. Components normally only create around a 20 — 25% margin, while services which involve labour can rake up margins as high as 65%. You need to maximize your gross profit before you apply for a loan.
According to Ty Kiisel, Editor for OnDeck,
“Thin margins can be problematic if the business can not demonstrate the capacity to repay the loan. Any lender will want to validate the capability of the borrower to make each and each periodic payment during the term of their loan. If you can demonstrate an ability to do that, you will improve the likelihood of succeeding.”
Poorly operated stores can observe profit margins dip below 10 percent for the entire small business. It’s difficult for any auto repair business to stay afloat if you can not improve how much you are making to more business standard levels. Showing the strength of your business’s margin will help the lender feel comfortable with your loan.
Bottom Line
Getting qualified for an auto mechanic loan can be challenging if your profit margins are reduced for your business or if you haven’t seen any significant sales growth recently. The ideal loan for you depends on how you intend on spending the money. Short term loans are the smartest choice for the largest amount of automobile repair shops due to their loan quantities, minimum qualification requirements, and quick financing capacities.
You can get a short term automobile mechanic loan of up to $500k out of OnDeck. To qualify you will need to be in business for at least 1 year, have a 500+ credit score, and be earning $100k+ in annual business revenue. You can apply online in about ten minutes and get pre qualified for a loan that can finance in as quick as 1 day.
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