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Finance for the Auto Repair Industry

Car garages and mechanics are an important part of the service industry in England, however, for small and independent businesses it can be difficult to succeed. From initial set-up costs to the ongoing cost of training and equipment maintaining liquidity can be tricky. This article considers finance specifically for the auto repair industry; we will look at asset finance, business loans and merchant cash advances as possible ways to maintain cash-flow and keep your car garage in business. 

Finance for Car Garages and Mechanics

There are some national chain car garages, however, the mainstay of the industry is small local businesses and sole traders; a notoriously difficult position to be in particularly following the recent Covid-19 pandemic. Whether you are struggling following the pandemic or looking for information to help you to expand your car garage, set-up as a mechanic or purchase new equipment the information in this article will help you to understand your finance options. We would highly recommend that you speak to an experienced commercial finance broker to ensure that you take appropriate finance for your requirements. 

Commercial finance is a huge area and depending on the amount of money that is required, and what it will be used for there are many different options. We will consider the most frequently used within the auto repair industry, explaining what they are, any pros and cons, and how to find out more or apply:

  • Asset finance
  • Business loans
  • Merchant cash advances

Asset Finance for Mechanics

Car garages and mechanics use a lot of equipment to repair their customers motor vehicles; this equipment can be very costly to purchase but essential for business success. Asset finance is a specific type of commercial finance that allows you to purchase equipment and machinery for business use. Asset finance allows you to spread the cost of equipment over a fixed period, you can opt to purchase or lease depending on your requirements, and the repayments are fixed enabling you to manage cash flow more effectively. 

Drawbacks to this type of finance are primarily that you may never own the equipment in the case of leasing, and even when purchasing it would be owned by the finance company until the final repayment is made – this means that if you default the payments the essential equipment could be repossessed. You can find out more about asset finance here

Business Loans for Car Garages

Business loans are the most known type of commercial finance. A business loan is a flexible way of managing cash flow; the loan can be used for a wide variety of purposes from buying equipment, paying for or training mechanics and other staff, premises, or other associated business expenses. A business loan is for a fixed amount, with set repayments over a pre-determined period, this allows for cash-flow certainty and planning to ensure that all repayments are made as per the agreement. 

Depending on the credit provider, the status of your business including length of time in operation, existing debt, and recent profit and loss accounts, getting a business loan can be tricky. An experienced commercial finance broker is well placed to assess your situation, advise whether a business loan would be appropriate for your car garage, and help you to find and apply for a deal that would best suit your requirements. 

Auto Repair Merchant Cash Advances

One of the least well-known types of finance, but an excellent choice for car garages and mechanics, a merchant cash advance (MCA) is another option. Most auto repair businesses deal directly with the customer, and frequently take payment for their services via a card payment terminal. Recent sales via the terminal can provide collateral for a cash advance. You can find out more here, however, briefly we will look at the facts. 

  • One month worth of sales is usually loaned
  • Repayments are usually 10% of sales until the loan is repaid
  • Interest fixed and added at the beginning
  • Only certain payment terminals are accepted
  • With sales history and the correct terminal, a relatively easy type of finance to secure

Securing Finance for the Car Repair Industry

Car garages and mechanics can maintain or grow their business with effective commercial finance. There are many types of finance available and going straight to the credit provider often doesn’t equate to the most appropriate type of finance or the best deal for your business. Booking an appointment with a dedicated broker that has industry experience is the best way to ensure that you get the right finance, the best deal, and the easiest experience. A commercial finance broker will offer advice, scour the market (often having access to broker only deals), as well as complete and manage the application process leaving you free to focus on your business and ensuring that your customers cars are repaired as per their requirements.