Auto Repair Business Loans
Whether your auto repair shop needs new equipment or more staff, additional financing can help you bring your shop to its full potential.
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In recent years, many consumers have been driving their cars and trucks longer to save money. This presents tremendous potential for new business for auto repair shops and mechanics, but taking advantage of timely opportunities sometimes costs money upfront.
Auto repair business loans provide support for small business owners looking to take advantage of this thriving market. Auto repair business financing could help small businesses cover daily expenses and make the most of potential growth opportunities.
Understanding auto repair business loans
Whether you've been in business for a year, are opening a business or looking to attract new customers and increase sales, an auto repair shop loan can address gaps in working capital and give an extra boost needed to grow.
Examples of how an auto repair shop loan could be used include:
- Investing in new technology
- Teaching existing employees new skills
- Purchasing tools and equipment
- Expanding services
Types of auto repair shop loans
There are many different types of small business loans for auto repair shops available. Depending on a shop's needs, there's likely one option that's a better fit than the rest. Does the business need to purchase new vehicle lifts or more advanced diagnostic tools to increase capacity for more appointments? Or does the shop need more mechanics on hand for walk-in customers? Understanding the differences between types of funding available to auto repair shops can help a business owner apply for the right financing for their situation.
Business line of credit
If an auto repair shop needs help financing ongoing or irregular costs, it may benefit from a line of credit for the business. This type of small business financing is flexible: If approved, use only what's needed and only pay fees on the funds that are used. This could be great for seasonal or occasional needs, like ramping up for an influx of weather-related repairs during an unexpectedly harsh winter.
Once the online application is complete with all the necessary information, abusiness line of credit application may be approved quickly. Term lengths will vary across lenders. After drawing on the line of credit, loan funds could hit the bank account in one to three banking days. The borrower only pays fees during the months when there's an outstanding balance.
Auto shop equipment financing
Opening and operating an auto repair business has always required a lot of expensive equipment. As passenger vehicles become increasingly advanced technologically, auto shops must also look at using equally advanced technology to address their needs.
Equipment financing is a specific kind of small business loan designed to help business owners buy machinery, tools, and other types of supplies necessary for operations. While equipment loans vary based on the lender, they often require an excellent credit score and a down payment. They generally cover a percentage of the total purchase price of the equipment, and the equipment itself serves as collateral. Some equipment loans could also cover some of the costs associated with the purchase, such as delivery and freight fees.
Small business loans for auto repair shops
Small business financing can play a big role in business growth in every industry, and auto repair shops are no exception. Shop owners could use conventional small business loans for things like purchasing inventory, smoothing out cash flow, offsetting unpaid customer bills, hiring staff, and launching a marketing campaign.
How to qualify for auto repair business loans
Lenders vary in terms of their requirements for small business loans. Many, however, look for similar qualities in borrowers, including a strong credit score, solid business plan, and healthy financial statements.
- Strong credit score: A credit score is an important factor in qualifying for an auto repair business loan. The higher the FICO credit score, the better chances an applicant has to get the best rate and terms available. But some lenders know small business borrowers are more than just a number. If a credit score isn't perfect, factors like collateral or the auto repair shop's financial health could affect the applicant's ability to qualify.
- Solid business plan: Lenders may also review the business plan and profit and loss statements to assess a business' financial health. When applying, a lender might review these documents to determine how reliable cash flow is and how professionally a shop owner manages their business and finances.
- Healthy financial statements: To be in the best position to qualify for a small business loan, review credit history and resolve any outstanding issues. The business owner may also want to update their business plan, or create one, if they do not have one already. If the business owner's city has a local Small Business Development Center (SBDC) office, advisors there could help applicants prepare for the small business loan application.
Finding the right auto repair business loans
Auto repair shop owners know better than many how important it is to pair the right tools with the right job. An auto repair shop wouldn't approach a 20-year-old German car with a manual transmission the same way it would a brand-new electric vehicle from an American automaker. Similarly, when thinking through an auto repair business' financing needs, it's important to choose the right loan for the job.
Understanding the difference between conventional small business loans, equipment financing, and a business line of credit may help a business owner determine the best path forward. Depending on how the funds will be used and preferred terms, an auto repair business can choose the right auto repair business financing to help the shop succeed.
American Express offers the American Express® Business Line of Credit, and you can click here to learn more. Note that the American Express Business Line of Credit may have different eligibility criteria, terms and features from the lending products that are discussed above in this article.
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