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SBA 7(a) Loans for Auto Repair Shops
The global automotive aftermarket industry is projected to grow to $722.8 billion by 2020. Lenders also know that 75% of aftermarket auto repair is performed by independent auto repair shops.
- How to Use an SBA 7(a) Loan for an Auto Repair Shop
- New Construction of an Auto Repair Building
- Buying Equipment for Your Auto Repair Shop
- Working Capital
- Refinancing an Auto Repair Shop
- Buying an Existing Building
- Case Study: Opening a Auto Repair Shop
- Considering an SBA 504 Loan
- Related Questions
- Get Financing
If you're looking to start, acquire, or secure financing for your auto repair shop, an SBA 7(a) loan could be a great option for your business.
How to Use an SBA 7(a) Loan for an Auto Repair Shop
You can use the SBA 7(a) for practically any legitimate business purpose (as it relates to plans for your auto repair shop).
New Construction of an Auto Repair Building
Any of the costs associated with new construction can be covered by the SBA 7(a): hydraulics, bay doors, sprinkler systems, alarms and security, etc.
Buying Equipment for Your Auto Repair Shop
If you have dated equipment or need to acquire some of the latest tools, an SBA 7(a) loan has got your back. These can be used for any business equipment purchases.
Working Capital
If you need additional financing for hiring employees, acquiring inventory, or other types of working capital needs, an SBA 7(a) loan can typically be used. These loans typically have a 10-year term, compared to the longer terms for real estate.
Refinancing an Auto Repair Shop
The funds from the SBA 7(a) can be used to refinance an existing loan. There are specific conditions for the loan to be used this way. For more information, check out our page on Refinancing Debt.
Buying an Existing Building
Purchasing an existing auto repair building is another common use of the SBA 7(a).
Case Study: Opening a Auto Repair Shop
Carla, a seasoned automotive technician, had long envisioned owning her own auto repair shop. After years of working in the industry, she identified a prime location in Tallahassee, Florida, that would be ideal for establishing Carla's Auto Clinic.
To purchase the property, set up the shop with state-of-the-art equipment, and cover initial operational expenses, Carla estimated she would need approximately $600,000. She decided that an SBA 7(a) loan would be the most suitable financing option for her project, given its favorable terms and flexibility.
Carla approached an SBA-approved lender and presented a detailed business plan, outlining her vision for Carla's Auto Clinic. The plan included a range of automotive repair services, an emphasis on excellent customer service, and a commitment to staying up-to-date with the latest industry technology.
The lender was impressed with Carla's extensive experience and dedication to creating a successful auto repair shop. They also recognized the potential for Carla's Auto Clinic to thrive in Tallahassee's growing community, given the well-thought-out business plan and the demand for high-quality auto repair services.
Carla's SBA 7(a) loan application was approved, providing her with the necessary funds to purchase the property, set up the shop, and cover initial operational expenses. With the financing secured, she began working on establishing Carla's Auto Clinic and transforming it into a top-notch repair facility.
Upon opening, Carla's Auto Clinic quickly gained a reputation for its exceptional service, skilled technicians, and transparent pricing. The local community embraced the new auto repair shop, and Carla's dream of owning a successful business became a reality, all thanks to the support of the SBA 7(a) loan program.
This is a fictional case study provided for illustrative purposes.
Considering an SBA 504 Loan
The SBA 7(a) loan is only one of several loan options backed by the Small Business Administration. In many cases, auto repair shops may actually find that other SBA loan, such as the SBA 504 loan, is a better fit for their needs. SBA 504 loans typically require lower down payments and have lower interest rates. However, they can only be used to fund commercial real estate, heavy equipment, and other fixed assets, and cannot be used to fund working capital.
To learn more about the SBA 7(a) loan program or to get a free quote, simply complete the form below. We'll get to work on finding your best financing options.
Related Questions
What are the eligibility requirements for an SBA 7(a) loan for an auto repair shop?
In order to qualify for an SBA 7(a) loan for an auto repair shop, business owners must have excellent credit and little to no debt. Additionally, the auto repair industry must generate at least $64 billion a year and independent auto shops must be highly favored by car owners. 70% of out-of-warranty cars must be taken to the independents.
Sources:
What are the advantages of an SBA 7(a) loan for an auto repair shop?
The SBA 7(a) loan offers several advantages for auto repair shops. It can be used to fund working capital, commercial real estate, new technology, and other savvy business investments. It also typically requires lower down payments and has lower interest rates than other loan options.
For more information, please see the following sources:
What are the maximum loan amounts for an SBA 7(a) loan for an auto repair shop?
The maximum loan amount for an SBA 7(a) loan for an auto repair shop is $5 million. The SBA will fund up to $3,750,000 of the loan and the private lender will cover the rest.
For larger loans, you may want to consider an SBA 504 loan. You can find more information about SBA 504 loans and a loan calculator here.
What are the repayment terms for an SBA 7(a) loan for an auto repair shop?
The repayment terms for an SBA 7(a) loan for an auto repair shop depend on the loan amount and the type of loan. Generally, SBA 7(a) loans have repayment terms of up to 25 years for real estate and up to 10 years for equipment and working capital. The interest rate is typically variable and based on the prime rate plus a margin. For more information, please visit https://www.sba.gov/funding-programs/loans/sba-loan-terms-rates.
What documents are required to apply for an SBA 7(a) loan for an auto repair shop?
To apply for an SBA 7(a) loan for an auto repair shop, you will need to provide the following documents:
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection
In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.
In some cases, auto repair shops may find that the SBA 504 loan is a better fit for their needs. SBA 504 loans typically require lower down payments and have lower interest rates. However, they can only be used to fund commercial real estate, heavy equipment, and other fixed assets, and cannot be used to fund working capital.