If you were asked to name a business that does a lot of credit or debit card sales, your first answer would likely be a restaurant or retail store. These businesses conduct many sales on a daily basis, and would therefore be perfect candidates for a merchant cash advance. This is a type of working capital loan that is paid back via a fixed percentage of credit or debit card transactions. An industry you probably would not immediately associate with a merchant cash advance, however, is auto repair. But once you take a close look at their cash flow situation, it’s undeniable that auto shops could reap the same benefits from a merchant cash advance as your first two answers.
A merchant cash advance can effectively alleviate a host of problems, and auto repair shops are no strangers to just about every financial dilemma in the book. But a successful auto shop never fails to serve its customers. This is perhaps the biggest bonus of a merchant cash advance: No matter how you use the money, you will almost certainly be able to serve more customers and increase overall customer satisfaction.
1. No Missed Payments To Worry About
You might have heard that merchant cash advances are only for businesses that consistently conduct a high volume of sales every day. This isn’t entirely true. It’s the amount of revenue you draw from credit and debit card sales that matters most. When was the last time you saw someone pay an auto repair bill with cash? Most customers pay with debit or credit cards, which extends the shop’s business cycle. But this inconvenience does not come close to the financial strain that results from having the majority of their income tied up in new car parts and unpaid insurance claims.
The point is, managing finances is excessively difficult for auto shops. It’s common for the business owner to rotate between serving customers and handling back-office duties, since there are usually only a few employees on staff at a time. Having to remember due dates and fluctuating interest rates for traditional small business loan payments will only make their days more stressful. But with a merchant cash advance, payments are automatically deducted. And before the funds are distributed, you know exactly how much you will be paying back for each transaction. A slow month does no harm to your payments. This makes it easy for borrowers to balance their books and devote the same attention to their customers.
2. Act Quickly, Save Money
Another reason auto repair owners are so busy is the need to act quickly. Misfortunes and lucrative opportunities often arise out of nowhere, possibly even at the same time. Maybe your tow truck needs new transmission. Or your supplier is offering an exclusive discount on snow tires for the upcoming season. What these two instances have in common is that they will not immediately contribute to your revenue stream. Sure, they will increase or stabilize revenue, just not right away. Waiting to fix your truck or secure bulk inventory will only increase the cost. A merchant cash advance lets you spend less money, both now and in the near future. You could pay off the debt as you tow more cars or install more snow tires over the next few months.
While the factor rate and retrieval rate for a merchant cash advance are set in stone, your repayment terms are highly flexible. So, if you were to look at your books and discover you need a little more money this month, there’s a good chance the business lender will be able to alter the daily capture percentage to give you more time to pay off the debt in full. One of the many major advantages of working with a company like United Capital Source is that all it takes is one phone call or email to see if it’s possible to make these kinds of changes. There’s no annoying back and forth communication for days or weeks on end. We will never impede you from serving your customers, since customer activity is a sign of a healthy business.
3. Secure Those Target Customers While You Still Can
It’s safe to say there has been a noticeable increase in the amount of advertisements you see for auto shops. This is largely due to the need to adapt to numerous changes in their industry. Cars are being built better, meaning they will need fewer repairs. And if they need repairs, it won’t be the same everyday tasks you’re used to. A merchant cash advance can overcome this hurdle in a number of ways. You could send your workers to advanced training sessions, or develop a marketing campaign that caters to the customers that are most important to retain. Some shops have even begun offering new services to solve new car problems. It could be a while before you see an increase in revenue from either effort but you could structure a merchant cash advance so that your largest payments are made when customer activity reaches its projected peak.
Predictability Is Priceless
Fees for a merchant cash advance tend to be higher than a traditional small business loan, which gives the impression that it is only accessible to large, wealthy auto shops. This couldn’t be further from the truth. Plenty of smaller businesses have found tremendous success with merchant cash advances, mostly because it gives them the freedom to concentrate on what they do best. Auto shops operate just fine without a predictable financial schedule. You can only imagine how much better they would serve customers if they actually knew what their cash flow was going to look like throughout the entire season.