What are the costs of running an auto repair shop?
The costs of operating an auto repair shop vary greatly and depend on a number of factors like your size, location, the type of equipment you choose, how you staff your shop, and more. On average, however, you can expect to spend somewhere in the $37,500 range. This figure includes expenses, such as:
- Garage space: Your location will determine the cost of your commercial garage. In general, however, you can expect to pay $0.50 per square foot per month if you live in a rural area or small town and $5.00 per square per month if you’re in a large city.
- Small repair tools: These may be screwdrivers, hammers, bolt extractors, pry bars, fuses, pliers, torque wrenches, cordless drills, and anything else your mechanics need to perform their jobs. You may spend anywhere from $1,000 to $2,000 or more.
- Large repair tools: Large repair tools refer to diagnostics and OBD machines, engine cranes, and hydraulic lifts, which tend to be very expensive. You may spend $8,000 to $10,000 on them.
- Administrative expenses: You’ll need to invest in licenses, certifications, and permits for your auto repair shop as well as insurance. These admin fees may run you between $5,000 to $6,000 per year.
How to Get an Auto Repair Shop Loan?
To improve your odds of qualifying for auto repair shop financing, keep these tips in mind.
- Consider collateral: Since collateral reduces lender risk, it’s easier to get approved for a secured loan that involves collateral or a valuable asset you own, like your commercial vehicle or property. If you’re a startup or newer repair shop, you may want to secure your loan with collateral.
- Build your business credit: Most lenders will consider your business credit history as it shows how likely you are to repay your loan. If you don’t have one, get a D-U-N-S number from Dun & Bradstreet and start working with vendors who will report your payment history to the bureaus. Note that this process will take time.
- Do your research: Not all auto repair shop loans are created equal. It’s your job to shop around, explore your options, and apply to the financing solutions with criteria that you meet.
- Solidify your business plan: Your business plan will explain your goals with your auto repair shop and what you intend to do with the loan proceeds. Make sure it’s professional and thorough before you send it to any lender.
How Can You Use Auto Repair Shop Loans?
Since auto repair shop loans are flexible, you can use them to cover a variety of expenses, such as:
- Garage space: You’ll need a garage so that your mechanics have a place to perform their repairs. With an auto repair shop loan, you can obtain the funds you need to pay for one.
- Equipment: Auto repair shops use no shortage of equipment. You may use equipment financing to buy or lease new or used equipment.
- Marketing: To get your name out there and retain loyal customers, you’ll want to invest in marketing. Auto repair shop loans may help you pay for social media, Google ads, print materials, and other marketing initiatives.
- Payroll: Auto repair financing might come in handy if you’re seeking funds to pay your mechanic and support staff. This is particularly true if you tend to face cash flow shortages during your slow season.
- Expansion: There may come a time where you want to open new locations. Financing can help you take your auto repair shop venture to the next level.
- Employee education: Your mechanics are your most important assets.That’s why you might want to invest in their education by financing the costs of classes and workshops that improve and advance their skills.
Types of Loans Available for Auto Repair Shops
The most common types of auto repair shop loans, include:
- Short-term business loans: Short-term business loans usually come with terms that range from a few months to a few years. These products, which are easier to get than long-term loans, can help you borrow capital quickly and cover short-term expenses with ease.
- Business lines of credit: Business lines of credit are a lot like credit cards with larger loan amounts. Since you can borrow as much or as little as you need, up to a set credit limit, this is a flexible financing option.
- Equipment financing: Equipment financing is just what it sounds like: financing for any equipment you need to run your auto repair shop. It’s secured to your equipment so if you default, the lender will have the right to seize it.
- SBA loans: Offered by individual lenders, SBA loans are guaranteed by the U.S. Small Business Administration. While SBA loans can be difficult to get, you can land large loan amounts and flexible repayment terms you might not be able to find elsewhere.
- Merchant cash advances: Merchant cash advances give you upfront payment in exchange for a portion of your future debit and credit card sales. You’ll repay your advance via a percentage of your daily sales or fixed withdrawals from your bank account.
Succeed with Auto Repair Shop Loans
Whether your mission is to buy an auto repair shop franchise, start one from scratch, or grow your existing venture, auto repair shop loans have you covered. These financing solutions can ensure you have enough capital to cover your expenses and enjoy a thriving, fulfilling business today, tomorrow, and years down the road.