Small Business Auto Loans: How to Qualify and Use Financing
Although your business may currently be successful, it is important to consider how you can invest in your business’s future. That’s why many auto business owners pursue business financing in order to increase cash flow or improve various areas of their operations.
In this post, we’ll explain how you can qualify for a small business loan. Then, we’ll focus on how auto business owners like you utilize their financing.
How to Qualify for Auto Business Financing
Before you start the application process, you should conduct research on different lenders and the types of financing they offer. Examples of auto business financing include:
- Loans from alternative lenders
- Small Business Administration (SBA) loans
- Bank loans
- Merchant cash advances
- Business lines of credit
Once you select the type of financing you’re interested in and find a lender, take time to review the lender’s requirements. For instance, your lender will likely have a business or personal credit score requirement. If you have a bad credit score, you likely won’t qualify for their funding options. Or, if you do qualify despite your credit score, you may be given a higher interest rate.
Regardless of the lender you apply to, you’ll likely also be asked to provide business bank statements. This will help the lender determine if you can handle making loan payments on top of your other financial responsibilities.
Once you receive a small business auto loan, you can implement your ideas and hopefully increase your business’s sales. In this next section, we’ll review five suggestions for using an auto loan for business growth.
How to Use a Business Loan For Your Auto Repair Business
1. Expand your business location
If you don’t have enough room at your auto repair business to fix your customers’ vehicles, you’ll have to turn some patrons away. This is why using your auto loan for business expansion can be a profitable opportunity.
Using your loan, you could invest in new real estate or expand upon your existing business location. By doing this, you’ll have a larger repair space to work on vehicles, and will be able to take on more customers at one time.
2. Offer additional auto repair services
Maybe right now you only offer certain auto repair services. If you have limited services, your customers may choose an auto shop with more options. However, after receiving a loan, you could expand into other areas, such as:
- Repairing trucks and larger commercial vehicles
- Handling electric repairs
- Replacing mufflers
Ask your customers if there are any services they need that you don’t offer. Since 80 percent of common auto repairs are related to durability, there may be simple services that you can add to your repertoire, like replacing spark plugs or oxygen sensors.
By expanding the services that you offer, you’ll be able to gain new customers and increase your business’s revenue.
3. Pay for equipment upgrades
To perform your auto repair services, you’ll need certain equipment and tools. Without these tools, you can’t afford to repair brakes, align tires and perform other services.
Due to this, many small business owners in this industry pursue equipment financing. By having a business loan solely for equipment costs, they can pay for necessary upgrades or repairs. However, if you need working capital for other costs in addition to equipment, this may not be the right option for you. This is because equipment loans are only supposed to be used for equipment costs.
If you are apprehensive to pay for new tools and equipment, you could try leasing instead. By doing this, you can afford high quality equipment without spending as much money to afford it.
4. Invest in marketing campaigns
If you’d like to spread the word about your auto repair business, you should focus on marketing efforts. Even if you have good marketing ideas, you may need additional financing in order to afford them. Once you secure a business loan, you could:
- Pay for social media campaigns
- Send out direct mail advertisements
- Purchase advertising space in local publications
Trying new auto business ideas related to marketing can help you continue to expand your customer base. Although you may have a marketing plan in place now, using your financing for this expense could help you elevate results.
5. Hire more employees
Utilizing your funding, hire additional mechanics and other personnel to serve your customers.
With a larger staff, you can effectively handle more business and your existing employees won’t feel overworked. Having a small business auto loans to spend on payroll will allow you to improve your business’s overall operations.
Conclusion: Invest in Your Auto Repair Business’s Future
Having access too small business auto loans can help y9ou enhance your business’s services. Whether it’s expanding your space so you have more room to work on vehicles or investing in marketing initiatives, there are many ways that you can improve your auto business.
Do you have other suggestions for auto business owners? Let us know in the comment section below.
Editor’s Note: This post was updated for accuracy and comprehensiveness in July 2021.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.