Think These Options before Deciding to Finance Auto Repair Shop

Cash flow is the main problem for an auto repair shop that has just begun the business in auto repair. It is important to manage it to ensure the business keeps developing. However, those who work with insurance companies and commercial accounts are repair shops that are badly affected by the cash-flow. When the business owners need to pay the salaries, machinery, parts and some other expenses, perhaps, we need to finance auto repair shop.

However, there are several ways to improve the cash flow before we finance our shop. All of these will be given as follows.

Think These Options before Deciding to Finance Auto Repair Shop
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Increase the Cash Reserve

Perhaps, we may have tried to build a cash reserve, but so far, we do not find it useful to help our cash-flow. In fact, to solve our cash flow problems, we just need to increase our reserve. This will be helpful particularly problems of cash-flow triggered by commercial payment and slow insurance.

It looks simple, but don’t think it will take a short period. Indeed, building our cash reserve really takes time and is difficult. We cannot just spare some of our profits every month, but the amount has to be carefully calculated.

We have to work with our bookkeeper or CPA to determine the amount of money that will be input as cash reserve. At least, to finance auto repair shop by building our cash reserve, we will need 30 up to 60 days. This period will be enough for us as the owner to stay safe.

In many cases, our reserve is probably not enough, especially when our company is growing. When it happens, we have to take into account adding on our cash reserve with financing.

Use Early-Payment Discounts to Save the Cash-Flow

There are a lot of considerations before we decide to finance auto repair shop to save our cash-flow. One of them is by offering our clients early payment discounts. That will help us to gain cash more quickly than the average period.

Now, offer our clients with this discount. 2% discounts may be enough to be given for our clients if they are willing to pay the repair cost in ten days, for instance.

Well, the terms can be decided on our own. So, we just need to be flexible with this discount. Just ensure that we do not give too much for our clients and we have to be smart to give discounts only for reliable clients. This discount should become a trick for our customers to abuse our offer.

Make the Most of Assets Based Financing

In case our company has become bigger with revenue up to more than one million dollars, we can finance auto repair shop by using multiple assets types. Only then, our cash-flow will improve. We have to be fund our assets and from them, we can structure the line like in the line of credit or a term loan.

When conventional loans are beyond our reach, there has been another solution to improve our liquidity only if our auto repair shop has been running for several years. A lot of banks will offer us loans. These loans have been backed ip by SBA or Small Business Administration.

Even though there are several programs that we can use to finance auto repair shop with different purposes, they do not directly offer the loans. There will be financial institutions and intermediary banks with whom SBA works. Those banks will be guaranteed by SBA so that those banks are capable of providing these loans for us.

When we do really decide to finance auto repair shop, there will be a lot of providers. For saving money, we just need to choose one of them offering us competitive price.