Conventional and SBA Financing for Auto Repair Businesses
The U.S. auto repair industry enjoyed a 2.5% growth rate over the last five years, and market research predicts this trend will continue through 2022. With the U.S. economy on the upswing, consumers are expected to have more disposable income for maintaining, and improving, their vehicles. If you’re an auto repair business owner, the current economic climate provides a clear opportunity for growth.
It’s no surprise that many auto repair shop owners are choosing to expand their operations through commercial real estate, new technology and other business investments. But if you’re one of the many shops considering expansion, it’s crucial to understand the complex world of financing. The experts at Cornerstone Capital Lending have a track record for helping auto repair businesses navigate the commercial finance process with clarity.
Here’s what you need to know about conventional and Small Business Administration (SBA) financing for auto repair businesses.
Why Secure Financing for your Auto Repair Business
Auto repair businesses looking to grow often choose to do so by purchasing real estate, expanding a current location, or buying new diagnostic tools and other equipment to enhance their offerings. But it can be difficult—or impractical—for businesses owners to shoulder the expenses involved in these long-term investments. That’s where commercial loans enter the picture.
When considering financing for auto repair businesses, it’s important to ask yourself key questions:
- Have you explored all the other growth options available to your business?
- Do you have a plan for how much funding you need and how exactly it will be used?
- How will your investment impact your business’ bottom line? For instance, if you’re considering a loan for new equipment, how would that equipment increase productivity or other key drivers of revenue?
- Have you connected with a certified lending company to help you determine which loan type is best for your auto repair business’ needs? (If not, reach out to us now!)
Because there are many auto repair financing loan options available today, it’s important to choose one that will offer the most long-term benefit for your business. Your goal for financing should be to expand your profits and growth while avoiding the pitfalls of an inappropriate lender or loan choice.
An experienced financial partner can help you select the ideal loan type for your auto repair business, streamline the application process and negotiate the best financing for your situation. Because your business objectives may evolve over time, a certified advisor can also ensure that you review all your lending options and their impact on your business’ financial future.
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Types of Financing for Auto Repair Businesses
Not all financing options are created equal. That’s why we provide our clients with one of the country’s widest varieties of financing options for auto repair businesses. These options can be adjusted to ensure that your loan will help you expand without diminishing your hard-earned profits. Options are available for businesses at all stages of growth.
In this article, we’ll be discussing two common types of financing for auto repair businesses: SBA and conventional loans.
SBA 7(a) loans for auto repair businesses
SBA 7(a) loans are the most common type of SBA financing. The SBA 7(a) loan allows business owners across industries to secure a loan for up to $5 million for the following:
- Purchasing new land (this includes construction costs)
- Purchasing or expanding an existing business
- Repairing existing capital
- Refinancing existing debt
- Purchasing machinery, furniture, supplies, fixtures or materials (for auto repair shops, this applies to new diagnostics and repair tools)
When compared with other financing options, the SBA7(a) loan often gives qualified business owners more flexibility, longer terms and the potential for lower down payments.
SBA 504 loans for auto repair businesses
SBA 504 loans, also known as Certified Development Company (CDC) loans, are designed specifically for businesses looking to grow through the purchase of real estate or equipment. SBA 504 funds can be used for:
- Purchasing land or existing buildings
- Purchasing long-term machinery and equipment
- Purchasing improvements such as grading, street improvements, parking lots and utilities
- Building new facilities or modernizing, renovating or converting your business’ existing facilities
Unlike the SBA 7(a), the SBA 504 cannot be used for working capital or inventory, or to consolidate, repay or refinance debt.
Conventional loans for auto repair businesses
Owner-occupied conventional loans are an option for auto repair businesses looking specifically to purchase or refinance commercial real estate. This loan type applies to multi-use owner-occupied property types including:
- Office properties: Professional, condominium, medical, dental, and veterinarian
- Industrial Properties: Heavy and light manufacturing, warehouse and R&D flex
- Retail Properties: General
- Special Use Properties: Assisted living facilities, adult care, day care facilities, funeral homes and select quick-service restaurants
SBA Financing for Auto Repair Businesses
The United States Small Business Administration is dedicated to helping small businesses succeed. Since being founded in 1953, the SBA has delivered millions of loans and other forms of assistance to small businesses across the country. In 2014, the SBA approved more than 52,000 SBA 7(a) loans totaling $19.19 billion— an increase of 7.4% from the dollar value of loans granted in 2013.
Although the name implies that these loans are provided directly by the SBA, in reality the SBA provides a guarantee to banks and lenders for the funds it lends to small businesses. When your business is applying for an SBA loan, you’re actually applying through a bank or an authorized SBA lender.
If you’re a veteran, the SBA offers specialized loan assistance. Auto repair shops and other businesses in rural areas can apply for a loan through the United States Department of Agriculture (USDA).
Why choose SBA financing for your auto repair shop? This loan program offers many benefits to qualifying business owners, including lower down payments and longer repayment terms than conventional bank loans. This makes the SBA loan a good option for auto repair businesses looking to preserve capital as they grow.
The SBA guarantees part of the loan in case a business defaults. While traditional loans can charge high rates for guarantees, interest rates and fees of SBA loans are often less than or equal to those of unguaranteed loans.
The Loan Process for Auto Repair Businesses
When you decide to explore conventional or SBA financing for your auto repair business, reach out to a certified financial expert. At Cornerstone Capital Lending, our clients enjoy a streamlined process that tells you quickly whether you qualify for a loan. We know your time is valuable, and we treat it as such every step of the way.
Applying for SBA financing for auto repair businesses
- Complete our simple online quote form . If you don’t know all the information required by our online quote form, simply contact us here.
- Discuss your financing requirements and options with our expert consultants.
- Let us know when you’re ready to complete a loan application. There’s no obligation to proceed with an application after your initial discussion with us.
- Complete your SBA loan or other loan application with the help of our consultants. We’ll explain your loan’s documentation requirements and help you understand any other fine details of your application.
- Receive your quote (in most cases, within 48 hours). All information you provide is kept strictly confidential and will only be used in the application process.
- Complete the Letter of Intent or Conditional Offer if you’re ready to move forward with your quote.
- If you’ve been successful thus far in the process, underwriting begins. Our team will support you by ensuring you know how to obtain all the documentation required by your application.
- Secure your loan, typically within 45 days of starting the process with our team.
SBA loans require specific documentation. For the SBA 7(a), for example, the applicant must submit a completed application, business debt schedule, personal finance statements, income statements and other documents on this SBA 7(a) submissions checklist. Choose a certified commercial financing expert who will walk you through this process, as submitting the right paperwork helps ensure your loan application is completed in a timely manner.
Selecting an SBA Lender
When choosing an SBA loan lender, it’s crucial to evaluate their experience, loan programs and track record helping other auto repair businesses secure SBA financing. Your lender must be certified by the SBA in order to help you secure your SBA 7(a) Loan, SBA 504 Loan or SBA Microloan.
When choosing a certified SBA Lender, it’s also important to understand their approach and the scope of their loan programs. Many small businesses, for example, seek out a partner that offers:
- A quick approval process
- Flexible payment terms and down payments
- A variety of loan programs (SBA 7(a) and SBA 504 loans, USDA loans, conventional loans and more)
- Expertise in your specific industry
- Certified experts dedicated to guiding you through the complex commercial financing process
The SBA certified team at Cornerstone Capital Lending has more than 40 years of combined experience helping businesses secure a variety of loan types, including SBA loans. We understand the specialized needs of auto repair businesses and have a track record for helping auto mechanic shops of all sizes achieve the financing they need to grow.
Our wide variety of loans can be tailored specifically to your vision for growth over the next decade and beyond. But don’t just take our word for it; review our recently funded businesses for a glimpse into our clients and expertise.
Take the Next Step
Whether you’re looking to purchase commercial real estate or update your existing auto garage, Cornerstone Capital Lending has a loan program to meet your business’ needs. With a broad portfolio and decades of expertise, our certified advisors help businesses of all sizes meet their capital needs. Reach out to our experts today to explore conventional and SBA financing for auto repair businesses.
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