Small Business Loans for Auto Repair Shops

What are business loans for auto repair shops?

There is a wide range of finance options that are suitable for an auto repair shop business. They range from traditional business loans to business lines of credit and more, which we’ll explore shortly. These options allow you to borrow money to grow your auto repair shop business.

While each form of financing differs, most offer to lend you money as a lump sum which you then pay back, plus interest, with a monthly payment over a term of 5 years or so. Some other options will give you a credit limit which you can borrow up to, and this can be a more flexible option if you don’t need a lump sum.

Best loans for auto repair shops

Credibility Capital

✔ Funding: Borrow up to $500,000
✔ Minimum Credit Score: 650
✔ Best For: Term loans
✔ Funding turnaround: Varies.

With Credibility Capital, borrowers with strong credit can obtain small business loans with attractive rates. A personal guarantee along with a business lien and revenue may be required to qualify. Note: This lender provides funding for all states except for North Dakota, Nevada, South Dakota, Vermont.

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BlueVine

✔ Funding: Borrow $5,000 - $250,000
✔ Minimum Credit Score: 600
✔ Loan term: 6-12 months
✔ Funding turnaround: 24-48 hours

With BlueVine, borrowers can get approval as fast as 24 hours and obtain a business line of credit for short term capital needs while only paying interest on the funds you borrow.

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SBA 7(a) loan

✔ Funding: Borrow up to $5,000,000
✔ Minimum Credit Score: 650
✔ Best For: SBA loans
✔ Funding turnaround: Varies.

The SBA 7(a) program features lenders such as Wells Fargo in their network and provides capped interest rates and long repayment term flexibility. Term loans and lines of credit access available. Typically, collateral will be required with a personal guarantee. Funding times vary and may be longer than most other lenders.

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PNC Bank

✔ Funding: Borrow up to $100,000
✔ Minimum Credit Score: 720
✔ Best For: Bank business line of credit & loans
✔ Funding turnaround: as fast as same business day

With PNC Bank, borrowers can obtain a line of credit with impressive interest rates and get funded as fast as same business day. Best for borrowers with high credit scores who can provide a personal guarantee.

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Who can benefit from an auto repair shop business loan?

Any kind of auto business can benefit from a business loan. Some examples are:

• Auto repair shop
• Auto parts store
• Auto body shop
• Tire store
• Car wash/car detailing provider
• Towing service company
• Truck repair store
• Transmission repair shop
• Classic car restorers

Types of loans for auto repair shops

Term Loans

These are traditional loans usually offered by online lenders, though you can also find them in the form of bank loans and SBA loans (both of which we’ll cover below). This is where you borrow a lump sum and pay it back (plus interest) over a short, medium, or long term via a monthly payment.

Business Line of Credit

A business line of credit works much like a credit card. The finance company agrees a maximum credit limit which you can draw from as often as you need to as long as you stay within the limit. You make regular repayments, often monthly, and that money is then available to you again. You only pay interest on the amount you draw, not the entire amount available.

Equipment Financing

Equipment financing can be a loan but is more often a leasing agreement. The important factor is that the equipment you purchase acts as the guarantee of the loan so you don’t need to provide collateral. You will usually be required to provide around 15% of the cost as a down payment with the leasing company lending you the remaining 85%. This form of financing is often easier to get than a standard loan because the equipment is collateral.

Bank Loans

A bank loan is one of the more difficult forms of funding to get because they have stringent requirements, but if you can get one, you may get an interest rate as low as 2-5%, which makes borrowing extremely affordable. While such loans are attractive they can be difficult to qualify for. You usually need an excellent credit score and a positive trading history of well over 2 years.

SBA Loans

The Small Business Administration guarantees up to 85% of loans from approved lenders. This makes them popular with lenders who can then offer borrowers favorable interest rates and generous terms. The SBA has various loan programs, notably the 7(a) program, 504, and Microloans which cover different aspects of business finance.

Merchant Cash Advance

If you process the majority of your payments through a card processor, a merchant cash advance may be a smart way to borrow. This is where the company that processes all card transactions lends you a lump sum which is then paid back via a percentage of all transactions after that.

Some merchants don’t charge interest but a fixed fee instead, and you can often pay the loan back very quickly if you’re doing plenty of business. Just make sure the percentage you agree to is affordable for you and won’t leave you low on working capital.

Most merchants won’t look at your credit score to determine your creditworthiness, since they already have the inside knowledge of how much you’re making. This can make it a good option if you’ve had financial difficulties in the past but your business is growing fast.