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no collateral required*
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Intro To Business Loans For Auto Repair Shops & Car Dealerships
It costs a lot of money for auto repair shops to maintain the same service level all year round. Their services require expensive equipment, plenty of staff, and of course, a healthy arsenal of auto parts. These expenses become more difficult to meet when equipment breaks or lengthy projects arise. A series of projects involving expensive or large quantities of auto parts could easily compromise most operational funding.
Car dealerships face similar dilemmas when their assets get tied up in new cars and trade-ins. The industry is also highly seasonal, despite the need to pay dealership fees, run marketing campaigns, and offer steep discounts throughout the year.
United Capital Source has access to business loans for auto repair shops and car dealerships short on cash and facing mounting expenses to stay competitive.
In this guide, we’ll answer the following questions and more:
What Are Business Loans For Auto Repair Shops And Car Dealerships?
United Capital Source has access to several business loans geared towards the cash flow cycles and recurring expenses of auto repair shops and car dealerships. In addition to covering temporary and large-scale costs, these business loans can bridge gaps in revenue when both industries wait to receive compensation.
Business loans for auto repair shops and car dealerships can come in the form of:
- Business Term Loans
- SBA Loans
- Business Line of Credit
- Equipment Financing
- Working Capital Loans
- Merchant Cash Advance
- Revenue-Based Business Loan
How Do Business Loans For Auto Repair Shops And Car Dealerships Work?
Business loans for auto repair shops and car dealerships can be used for many purposes and can, therefore, feature several repayment structures.
For example, let’s say your auto parts supplier offers a discount on snow tires if you buy now, during the slow season. Since you’re not going to sell the inventory until next season, this situation is best suited for a Merchant Cash Advance or Working Capital Loan. With a Merchant Cash Advance, you could make smaller payments until business picks up and you sell the snow tires. A short-term Working Capital Loan might make sense as well because, by the time you finish making payments, you’d be reimbursed with the new revenue and wouldn’t have to spend your profits on loan payments.
Maybe you need to cover payroll and other regular expenses while completing large projects or awaiting compensation from an insurance provider. In these cases, a Business Line of Credit might be a more fitting solution. This product is best suited for short-term, medium-sized expenses. It’s cheapest when you can pay off your full balance in just a few months.
As for car dealerships, one of their most significant expenses is inventory, especially if they sell used cars. A Working Capital Loan would allow you to cover operational costs while purchasing large quantities of vehicles. We can also supply the funds required to market your new inventory aggressively. This way, you can sell the used vehicles as quickly as possible and maximize profitability.
Auto Repair & Dealership Loan Options Compared
|LOAN TYPES||MAX AMOUNTS||RATES||SPEED|
|Merchant Cash Advance||$7.5k – $1m||Starting at 1.09||1-2 business days|
|SBA Loan||$50k-$10m||Starting at 5%||3-5 weeks|
|Business Term Loan||$10k to $5m||Starting at 5%||1-3 business days|
|Business Line of Credit||$10k to $250k||Starting at 8%||1-3 business days|
|Receivables/Invoice Factoring||$50k-$10m||Starting at 5.8%||1-2 weeks|
|Equipment Financing||Up to $5m per piece||Starting at 5%||3-10 business days|
|Revenue Based Business Loans||$10K – $5m||Starting at 9%||1-3 business days|
What Are The Advantages of Business Loans For Auto Repair Shops And Car Dealerships?
Business loans can give auto repair shops the means to meet demand, which can skyrocket at any time. Busy neighborhoods have a myriad of auto shops to choose from. Thus, if you don’t have the staff or inventory to get jobs done the moment they are requested, customers can easily take their business elsewhere. They won’t wait for you to be ready. Business loans allow you to maintain the staff, equipment, and inventory to take virtually every appointment that comes your way.
You can also accept lengthy and expensive projects that would otherwise prevent you from paying other bills. Some of these projects might be mostly covered by insurance providers, which can take a long time to send reimbursements. In other words, business loans give you the ability to say “yes” when your operational expenses and other obligations might say “no.”
Likewise, car dealerships can use business loans to cater to the preferences of their target buyers. This could mean purchasing large quantities of certain vehicles, renovating their waiting area, or ramping up their digital marketing efforts. Research has found that millennials visit at least 18 websites for recommendations or price comparisons before going to a dealership. Hence, dealerships must advertise themselves strongly enough to attract attention and stand out from the competition.
Lastly, it’s important to note that business loans from companies like UCS are much more accessible than traditional products. Minimal paperwork is required, and you can get funded in just 24-48 hours. You don’t even need excellent credit, perfect cash flow, or collateral. Hence, if new expenses arise unexpectedly, you won’t have to worry about meeting steep requirements or waiting several weeks (or months) for funds to appear in your bank account.
What Are The Disadvantages of Business Loans For Auto Repair Shops And Car Dealerships?
The accessibility of business loans can make it tempting to seek funds you don’t necessarily need. For example, let’s say a newly-released piece of equipment has the potential to increase efficiency. This might seem like an excellent opportunity to pursue Equipment Financing. But after you purchase the equipment, you realize it will only be relevant for about two years. In this situation, leasing would have made more financial sense than buying.
Major expenses also tend to create other costs, making it challenging to figure out how much money to borrow. Maybe you’ve just bought new equipment that allows you to offer new services. Well, do your employees have the training to perform these services or handle the latest equipment? Training courses come with a cost, and your new equipment is still yet to bring in revenue.
A similar dilemma could arise after ordering expensive parts for a large project. Do you also have enough employees on staff to complete the project by the scheduled time frame? If so, how will you continue to pay these employees if demand drops once the project is completed?
The only way to choose the correct borrowing amount and repayment structure is by researching your options beforehand. Unfortunately, many business owners don’t have the time to study business loans while running their businesses.
Who Qualifies For Business Loans For Auto Repair Shops & Car Dealerships?
Approved businesses generally met the following criteria:
How To Apply For Business Loans For Auto Repair Shops And Car Dealerships:
The amount of paperwork required for the application depends on your chosen product. For most products, funds can be approved and distributed in up to three business days. Here’s how to apply:
Step 1: Choose the Right Product
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Step 2: Gather Your Documents
Here are the documents and information required for the seven products mentioned above:
- Driver’s license
- Voided business check
- Bank statements from the past three months
- Invoice for equipment (for Equipment Financing)
- Credit card processing statements from the past three months (for Merchant Cash Advance)
SBA Loans require additional documents and information. To learn what’s needed for the SBA Loan application, visit our SBA Loan page.
Step 3: Fill Out Application
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Step 4: Speak to a Representative
Once you apply, a representative will reach out to you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
Step 5: Receive Approval
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks to receive funding.
Your Business Financing Gets Set Up – Now What?
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
What If I’m Declined For a Business Loan?
If your application is declined, it might be because you applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
We might also decline your application after determining that you cannot afford to take on more debt at this time. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through UCS and are usually much easier to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider these credit repair services. We can help you identify the issues that are keeping your score down and develop practical solutions for eliminating them.
People Also Ask:
Why Do Car Dealerships Need Business Loans?
The stability of the automotive industry is directly linked to the general economy. When the economy takes a turn for the worse, virtually all dealerships feel the impact to some degree. Business loans can help dealerships meet their current obligations and maintain relevance during rough patches.
Also, car dealerships don’t make any money from trade-ins until they sell the vehicle. But does that mean they shouldn’t stock up on trade-ins now that used cars are so popular? Business loans can come in handy when dealerships acquire trade-ins in the months leading up to a busy period.
Another reasonable use of business loans for car dealerships is marketing. Ever wonder why used car dealerships tend to slash prices so aggressively? It’s because they haven’t sold their cars as quickly as intended. The dealership is merely trying to minimize the loss. Why didn’t the vehicle sell at its original price? Odds are, it’s because the dealership failed to market the vehicle correctly. With the right marketing strategy, dealerships don’t have to slash prices and lose out on profits.
Is Collateral Required For Business Loans For Auto Repair Shops And Car Dealerships?
No, business loans for either industry do not require collateral. However, if you can provide collateral, you may be able to offset issues with credit or cash flow that would have otherwise resulted in higher rates or lower borrowing amounts. Before assuming you can provide collateral, contact the business loan provider to make sure they accept your desired type of collateral. And the value of collateral might not directly reflect your permitted borrowing limit. For example, $10,000 worth of collateral might be able to get you a $6,000 loan with a competitive interest rate.
How Do You Qualify For Business Loans for Auto Repair Shops and Car Dealerships?
This depends on where you apply and the product you have in mind. If you’re looking for a bank loan, you’ll need excellent credit, perfect cash flow, collateral, plenty of money in the bank, high annual revenue, and at least two years in business.
Products from companies like United Capital Source are much more accessible. Your ability to meet the requirements mentioned above will determine your borrowing amount, rates, and terms. But falling short in any (or more than one) of these areas won’t stop you from qualifying for multiple products. With some products, your credit score is practically irrelevant. For example, eligibility for a Merchant Cash Advance is based on the size and volume of your debit and credit card sales.
Can I Get a Business Loan For Auto Repair Shops or Car Dealerships With Bad Credit?
Yes, five out of the seven aforementioned products are accessible for borrowers with bad credit. Your rates may be higher, and your terms may be shorter because bad credit makes you more likely to default. However, if you have strong cash flow or can provide collateral, your bad credit may have less impact on your rates and terms.
The only two products that are not accessible with bad credit are Business Term Loans and SBA Loans. These products carry high borrowing limits, low rates, and long terms. The other five products usually carry shorter terms and are much easier to repay. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.