The $86.2 billion US automotive repair service industry consists of business that offer service, repair and maintenance of cars, trucks, vans and other motor vehicles.
Major automotive repair and maintenance services are mechanical repair (50% of industry revenue), automotive collision repair (30%) with car washes and oil/lube businesses each getting about 10%. Around 70% of out-of-warranty cars are maintaned, serviced and repaired at independent automotive shops. Small business research reports shows that 77% of paint body shops are family-owned businesses.
Types of Auto Repair Businesses
- Auto Body & Collision Repair Shops
- Automotive Exhaust Repair Shops
- Auto Paint Shop
- Diesel Engine Repair Shops
- General Automotive Repair Shops
- Glass Replacement Shops
- Oil Change Lube Shops
- Tire Repair Shops
- Transmission Repair Shops
- Tune-Up Shops
- Radiator Repair Shops
- Wheel Alignment Shops
Bank Loans For Auto Repair Shops
Bank term loans and lines of credit offer auto repair shop owners with an established, profitable business, and have exceptional credit, your best financing options. With rates starting at 5%, and terms between 1-10 years, a traditional bank loan is the most desired of all commercial financing options.
Unfortunately, large banks only have a small business loan approval rating of about 22%. Small banks have a better small business loan approval rate of nearly 50%. So you need to have solid financials to get approved for traditional financing.
SBA Loans For Auto Repair Shops
SBA loan programs provide guarantees from the government to cover a portion of the lender’s losses should a borrow for a SBA loan default. By covering a large portion of the lender’s losses, the lenders are able to provide loans to small business owners who wouldn’t normally be approved for traditional financing.
Through the use of the SBA 7(a) program, the SBA 504 program or the Microloan program, SBA loans have rates starting at 6% with repayments terms ranging from 5-25 years depending on use.
Auto Repair Shop Equipment Leasing
Equipment leasing is a good options for auto repair shop owners that can’t obtain traditional financing from a bank to acquire new or used equipment.
Leasing auto repair shop equipment allows a business owner to get the equipment they need without having to pay the full upfront costs of the equipment. With rates ranging from 5% and repayment terms up to 5 years, a business owner is able to lease the equipment with the option to buy the equipment at the end of the agreement.
Alternative Financing For Auto Repair Shops
Alternative loans have reasonable rates (9-20% annually) and repayment terms ranging from 1-5 years. A mid prime alternative business loan is a good option for business owners that lack the credit or financial statements to obtain traditional bank financing.
With a lower credit requirements (600+) than banks, fast approvals — usually in 24 hours — and funding within a week, this type of commercial loan is perfect for business looking for fast funding and good rates.
Cash Advances For Auto Repair Shops
Merchant cash advance companies don’t actually lend money to auto repair shops but, instead, purchase future credit card and/or bank deposits in return for providing the small business with an upfront lump sum.
Characteristics of different merchant cash advance loans can vary in rates and repayment. Rates can be as low as 16% and as high as 100% with repayment terms ranging from 4-24 months.