Automotive Business Loan
Get access to revolving funds when you need it most
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Take Your Business to the Next Level with an Automotive Business Loan
Business owners in the automotive industry often find themselves in an awkward situation: a majority of operational funding relies on customer payments, but most customers only pay the full amount when the job is done. So how do automotive businesses cover payroll and other business expenses, while working on jobs, waiting for payment?
Sometimes, business opportunities come up – maybe multiple, or lengthy projects – that could require new and expensive car parts. Would you be willing to give up those opportunities just because you don’t have working capital available and your competition does?
Auto shops often have to invest a substantial amount of cash to provide high-quality service – even without seeing an immediate increase in revenue. Because auto shops are usually covered by insurance companies, they often have to continue serving their customers as they wait for reimbursements.
Car dealerships, another sector of the automotive industry, experience similar cash flow problems. Since 75% of their assets are invested in new cars and trade-ins, profits are only realized when a car is sold.
Additionally, the car dealership business can be highly seasonal. Despite an off-season, the dealership still needs to pay dealership fees and offer competitive rates and discounts, while maintaining marketing campaigns throughout the year.
Automotive businesses could often use the help of an automotive business loan. SMB Compass has funded different types of automotive companies throughout the United States, such as:
Tire and Auto Parts
Car Wash and Detailing
Best Ways to Use an Automotive Business Loan
Open new locations
Purchase parts, equipment, and inventory
Advertising and marketing
Hire new employees
Education and training for employees
Refinance existing debt
Pay for unexpected business expenses
Different Loan Options for Auto Business Loans
SBA 7(a) Loans
The SBA 7(a) loan is perfect for automotive businesses because of its competitive interest rates and 10 to 25-year repayment terms. A 7(a) loan is a general purpose loan, which means you can use it for just about anything – as long as it’s for the benefit of your automotive business.
Invoice factoring is the selling your open invoices or accounts receivable to lenders or factoring companies at a discounted price. When your customers pay their dues, it goes directly to the lender. If you have open invoices and you need additional working capital, you can use invoice factoring to gain access to quick cash when you need it.
Business Line of Credit
Just like a credit card, a business line of credit lets you withdraw funds against a predetermined amount set by the lender. Businesses pay the amount they withdraw and then can use the line again for other purchases.
Personal credit, cash flow, and business credit are the basis for the terms of your line credit. Since collateral is not required, lenders look for candidates with solid cash flow and operating history. If you have an excellent credit history, as well as cash flow, the terms of your loan will most likely be attractive.
Small business owners in the automotive industry often have two options when it comes to buying equipment:
- Taking on a sizable equipment loan to buy new equipment; or
- Pool resources to buy used tools.
You don’t have to sacrifice your financial cushion just to buy new equipment. Equipment financing enables you to purchase brand new equipment without having to disrupt cash flow, drain your savings, or use up working capital.