Trades, auto and home services

Auto Repair and Body Shop Funding

Independent repair shops, collision shops and tire and lube centers are written by equipment, SBA, real estate and private lenders. The capital usually goes to lifts and paint booths, the shop building, parts and payroll, and buying an existing shop.

What lenders weigh in a auto repair & body shops file

  • Car count and average repair order over the last year or more show whether a shop is winning customers or raising prices on a shrinking base, and lenders read both together.
  • The technician roster, who is certified and how long each has stayed, is the capacity of the shop, and a business that depends on the owner's diagnostic work is priced as a key-person risk.
  • The lease term is compared with the loan term, because lifts and a paint booth are fixtures and an SBA lender will not finance equipment that may belong to the landlord before the loan is repaid.
  • The environmental history of the site, waste oil, solvents, paint and any underground tanks, decides whether a real estate lender will proceed and what the tenant may be liable for.
  • On collision work, insurer payment timing creates receivables a mechanical shop does not carry, so lenders look for labeled insurer deposits and size a line to that cycle.
  • On an acquisition, the lender recasts the seller's cash flow after a market salary for the buyer and has the equipment appraised at resale value, and sizes the loan to those numbers.

What gets funded

  • Equipment financing and leasing: Funds lifts, alignment racks, tire machines, scan tools, frame machines and paint booths with installation, against the equipment itself. The most routinely written structure in the trade, available to newer shops with a down payment and the owner's credit.
  • SBA 504 and commercial real estate loans for the building: Funds the purchase or buildout of an owner-occupied shop building. Lenders say yes because the real estate is collateral, and they want an appraisal, an environmental report and the shop's cash flow to cover the payment.
  • SBA 7(a) for buying a shop or a buildout: Shops are eligible under 13 CFR 120.110. Lenders write 7(a) for buying an existing repair or body shop with a seller note behind it, a partner buyout, or a buildout that bundles equipment and working capital in one long-term loan.
  • Lines of credit and working capital: Carries parts inventory, a tire stocking order, payroll in a slow month and the weeks between a collision repair and the insurer's payment. Banks write lines on tax returns. Private lenders write them on bank statements, faster and at a higher cost.
  • Unsecured term loans: Written on owner credit and deposit history for a marketing push, a shop management system or a bay buildout the landlord will not fund, with no lien on the lifts. Faster than a bank line and cheaper than a cash advance on card settlements.

Auto Repair & Body Shops funding guides

How MercFinancial places auto repair & body shops requests

MercFinancial is a commercial funding brokerage in Houston, not a lender, and it does not run an auto repair program or promise an approval. A shop request starts with the file: the shop management reports with car count and average repair order, twelve months of bank and card statements with insurer deposits labeled, the lease or the deed and the environmental file, the equipment schedule, the technician roster, the owners' credit, and what the money is for. From there, the funding sources among MercFinancial's more than 160 whose credit policy fits the trade and the structure are identified, one file is placed with all of them, and the offers are compared side by side.

Availability of any product depends on the funding source, and when nothing fits yet, you are told that plainly along with what would change the answer. Stephanie, the lending assistant, pre-qualifies a request in a few minutes with a soft credit pull that does not affect your score, and a free call with a funding specialist is booked at the contact page.

Frequently asked questions

Can an auto repair shop get a business loan?

Yes, and from more kinds of lender than most small businesses. Equipment lenders fund lifts, racks, booths and tools against the asset, SBA and commercial real estate lenders fund the shop building, banks and private lenders write lines of credit for parts and payroll, and SBA lenders fund the purchase of an existing shop. Which structure fits depends on the shop's numbers, its lease, the owner and the funding source's policy.

What do lenders look at on an auto repair or body shop file?

Car count and average repair order from the shop management system, twelve months of bank and card statements with the slowest months and any insurer deposits labeled, the technician roster, the lease term or the deed, the environmental history of the site, the equipment schedule with liens, the owners' credit, and any existing advances. SBA and real estate lenders add tax returns, a balance sheet, an appraisal and an environmental report.

Can I get an SBA loan for an auto body shop?

Yes. Auto repair and body shops are not on the SBA's list of ineligible businesses in 13 CFR 120.110, so 7(a) and 504 loans are available through any SBA lender whose credit policy accepts the trade. Lenders commonly use 7(a) for buying a shop, a buildout with equipment and working capital, or a partner buyout, and 504 for the building. Expect an equity injection, personal guaranties and a lease at least as long as the loan.

How do I finance lifts, a paint booth or an alignment rack?

Through an equipment lender, which funds from the vendor quote against the equipment itself, commonly with a down payment and a term of several years, and often includes installation and fire suppression on the same loan. Equipment placed in service in the tax year may be expensed under Section 179, subject to limits and the owner's circumstances, which a tax adviser should confirm. Leasing is the alternative for a lower payment.

How is buying an existing auto repair shop financed?

Usually with an SBA 7(a) loan for most of the price, a seller note that stands behind it, and the buyer's own cash, with the building financed alongside with an SBA 504 loan or leased from the seller on a term at least as long as the loan. The lender recasts the seller's cash flow after a market salary for the buyer, appraises the equipment, reads the technician roster and the environmental file, and sizes the loan to those numbers.

Financing for this industry

Related industries

MercFinancial is a commercial funding brokerage, not a lender. Approval, loan amount, rate, term and funding are decided by the funding source on the strength of the file; nothing on this page is an offer or a commitment to lend.