Auto Business Loans

What You Need to Know about Auto Business Loans

So you’ve saved up $300,000 of your own money, and you’ve brought in investors to pony up another $500,000 in investor money so that you could start your own auto repair business. Loans were the last thing on your mind, because you thought you had enough money, from your own savings and with your investors. The cost of refurbishing and equipping your facility was more than you thought, and a lot of the cash that you were going to put toward operations was taken up just getting ready to open the doors. You had an aggressive marketing campaign in place, and you had business from Day One, but not as much as you had planned. So now that you’re nearly 12 months into running your shop, you still face tight days when it comes to cash on hand. Your business is increasing to the point where you really want to consider buying the vacant lot next door and adding capacity, but there’s no way you can do that right now.

When Banks Say NO, We Say Yes..

A consideral amount banks won’t help out new entrepreneurs with auto repair business loans. A lot of our customers complain that the banks won’t lend money, except to people who don’t really need the money, and in a real sense this is true. Even people who are applying for auto dealer business loans are also finding that traditional lending sources have tightened up their requirements and are not helping entrepreneurs find the capital that they need to start and expand their small business. This approach to providing working capital is shortsighted. Sure, there are some businesses which are poorly conceived and shoddily planned, and those are bad investments for any lender. However, there are also many entrepreneurs who have done the research to find the perfect location for their business, have saved up to open their doors, but don’t have the lending profile that banks will appreciate. Still others have room in their budgets to pay back the money they receive to help them grow their businesses, but they don’t have the liquidity to take on a fixed monthly payment. If either of these scenarios sound familiar, take a look at this article about the merchant cash advances that our lending network offers, and see if this sounds like it may help you. Many entrepreneurs throughout Canada & the United States have taken out this type of cash advance and found it gave them the boost they needed to elevate their businesses.

What is a Merchant Cash Advance?

A Merchant Cash Advance (MCA) is a way of receiving financing for your future sales. An MCA provider gives you an upfront sum of cash in exchange for an agreed upon percentage of future credit card and/or debit card sales.

Why Take Out a Merchant Cash Advance?

You might wonder why you should take out a cash advance when you already have investors who have helped to fund your business. If you go back and ask your investors for more money before they have seen a return, you can get a much different response than what you got the first time. Even if you get an approval for a loan, that process can take a month or two, even if your first application was approved. A cash advance gives you the money you need when you need it.

Here’s how it works

When you contact Best Bridge Capital, and provide your sales records it will allow us to determine how much your business may qualify for. The factors that allow us to determine this are;

  • How much do you make from credit or debit card sales
  • Your personal and business credit scores
  • overall business revenue 

The Factor Rate:

The factor rate tells you how much you’ll have to pay back. If you receive an approval for a $200,000 merchant cash advance for your auto repair business, and your factor rate is 1.2, then you pay $200,000 x 1.2 back – so a total of $240,000.

How do lenders figure out how much to advance you, and what the factor rate will be?

Factor rates generally vary from 1.15 to 1.45. Credit scores come into play, as well as your daily sales. The amount of time that your business has been open plays a role as well. The other important number is the repayment percentage (aka retrieval rate).

Merchant Advance Repayment (Retrieval Rate)

The merchant cash advance provider automatically deducts a percentage of your credit and/or debit card sales until the agreed-upon amount has been repaid in full. The good thing is that on days when your sales are down, your payment is less. On higher revenue days, the payment is greater, but the flexibility tailors the repayment plan to your business cycles.

When you negotiate the advance with your provider, try and get the lowest percentage rate possible when it comes to payments. You don’t save any money by paying the advance back sooner – for the $200,000 advance above, you would have to pay back $240,000 whether you had a huge boom and made it in two months or took a year and a half to pay it back. So having a lower percentage rate gives you more flexibility. Continuing with the $240,000 payback amount example. In this case, lets assume your cash advance provider deducts 15% of your monthly credit/debit card sales until you’ve repaid the $240,000, and your auto repair shop generates an average of $100,000 in credit/debit revenue each month: You would repay $15,000 each month for 16 months. 

Now, if you run the numbers and start thinking about the APR involved, this is more expensive than taking out a bank loan. But if you don’t have the credit or business profile to get approval for a bank loan, and if you need the flexibility that percentage-based payments would provide, then this arrangement will help your business much more than a new installment payment would.

Get Funded FAST with Best Bridge Capital

In addition to the flexible payments and the fast approval rate (you will get funded in a week or less in the vast majority of cases), there is the added bonus that no collateral security is required. Its repayment is tied to your credit and debit card sales for your business, so if those dry up, then that’s that. The risk of this is a part of the calculation of your factor rate and approval amount.

Summary:

If you have opened an auto repair business, and things are tight at the beginning despite the fact that you have robust sales, a merchant cash advance can make all the difference. You can refill your savings coffer and put money toward marketing and expansion. You’re paying yourself back every day with a percentage of your revenue, but you would be doing this with any sort of financing. Why not choose a vehicle that offers as much flexibility as possible? Many entrepreneurs all over Canada have benefited from this type of credit, using the infusion of cash to make that expansion or higher those extra employees, and the resulting increase in revenue has made the advance more than worth it.

Want more? Get in touch with BBC today.

We have a network that will work with just about every industry and credit profile. Call or email today!

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