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Types of Business Loans for Auto Repair Shops

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Types of Business Loans for Auto Repair Shops

Auto repair shops in Ottawa and elsewhere in the country can benefit immensely from the Canada Small Business Financing Program (CSBFP) loans. One distinct advantage of CSBFP loans is that they have limits to their interest rates. The reasonable interest rates borrowers enjoy come about since the government shares the risk with lenders.

Not all aspects of the business or all types of purchases can be funded using CSBFP loans. However, the majority of purchases of an auto shop can be financed such as improvements/renovations and equipment purchases.

For the conventional types of loans, auto shops can benefit from the following options:

Merchant Cash Advances

Auto shops have a lot to gain from merchant cash advances even though they are not offered through the CSBFP. An MCA provides an upfront sum of money which is recovered through a share of future credit card sales. MCAs are approved and granted quickly and have minimal borrowing requirements. However, MCA loans are more expensive than other simple loan types.

Term Loans

Term loans are versatile since they can be used for numerous business reasons. The advanced sum of money can be used by the auto shop to make larger purchases. One of the major reasons a business takes out a term loan is to pay off or consolidate other debts. With proper use of term loans, businesses can meet their regular financing needs.

Revolving Line of Credit

Revolving lines of credit is a long term financing option for businesses and especially for auto shops that require constant funding and more flexibility. The revolving line of credit attracts a higher APR compared to a business term loan.

Equipment Loans

Equipment loans are very similar to term loans but use equipment bought as collateral for the loan. The equipment loans do not have the stringent collateral requirements which are common for other loans. Additionally, equipment loans come at better rates.