Securing Financing for Your Auto Shop
As a Canadian small business owner, chances are you’ll need financing from time to time to improve or expand your business to better suit the needs of your clients. Fortunately, there are many financing solutions that can help small business owners. Below, we’re going explore the best financing options for auto shops and how you can better your business both financially and non-financially.
Choosing the Right Working Capital Solution
There are a number of financing options available to small business owners in Canada, particularly for working capital needs. Even though it’s easy to simply choose the most popular option, as a business owner, it’s important that you do your due diligence. In general, there are three main options you can choose from as discussed below.
The great thing about banks is they always have money to lend. Although, it can be somewhat tricky to qualify for financing as banks have become more strict with their requirements. This is especially true if you are a small auto business with a non-traditional business model, uneven cash inflows, or are currently in a tough financial situation. That being said, if you can get approved, and especially if you already have a business relationship with the bank, then it could be a great option for you. Just keep in mind, that there are alternative options available that could better suit your needs.
Small Business Loan
Being a small business owner can be a challenge, particularly if you’re trying to compete with the big dogs. Fortunately, alternative lenders understand this and have designed financial products to cater to the unique needs of the small business owner. Small business loans are ideal for businesses with regular and steady cash inflows because the payments are structured and fixed. This type of loan can be used for any of your business purposes, it is by no means limited.
Merchant Cash Advance
The merchant cash advance can suit your needs, as a business owner, by aligning with your cash flow so you can repay on your own terms. With a merchant cash advance, your future debit and credit sales are used to advance you the funds and your lender withholds a small percentage of your daily sales until you’ve repaid your advance. The ideology behind the merchant cash advance is that you make big repayments when your sales are strong and small payments when business is slow. This makes it an ideal option for an auto shop where seasonal changes can affect your daily income.
Using a Business Plan to Help You Achieve Your Goals
Something that will help you not only achieve your business goals but also gain access to the funding you need, is a well-executed business plan. A business plan in place will allow you to stay focused on your end goal and implement the steps needed to get there. In addition, lenders like to see business plans from their applicants because it demonstrates dedication, organization, and responsibility. Below are the items that should be included in your business plan. Keep in mind that this list is a starting point, feel free to omit or include more information based on your unique business.
- Executive Summary. This is essentially the cover page of your business plan, it should be a brief, clear, and well-written summary of your plan. The section should draw in readers so they’re compelled to read more.
- Description of Company. In this section, you will be describing your placement in the auto shop industry. Be sure to include details as to who you are, how you operate, and your goals.
- Products and Services. The products and services are the backbone of your business, ensure that you describe what you’re selling in detail. If you want to go a step further, add graphics or diagrams as well as details about your suppliers.
- Market Analysis. As a member of the auto industry, you should have a full grasp of the industry and market you are apart of.
- Strategy and Execution. How you intend to sell your products and services as well as market them should be included in your business plan.
- Everyone that is a part of your team, whether it's the owners, management, employees, or board of directors, should be identified. If you feel comfortable, include an organizational structure too.
- Financial Plan. This part of your business plan should demonstrate your financial plan and financial projections. You may need the help of a professional accountant for this component.
Meeting the Needs of Your Clients
Your auto shop is an integral part of your community, your clients rely on you to keep their vehicles working all year round. Are you offering the right type of services to meet the needs of your community? Have you taken into consideration how the seasons affect your business?
Looking at the needs of your clients can provide you with valuable insight into when the ideal time to apply for financing is.
While all businesses have unique needs, for an auto shop, a good time to consider applying for additional funding might be in the spring or in the fall. Summer and winter are often the busiest seasons for car owners and therefore your business. Getting a head start is your best bet to make sure you can implement your plans on time, whether that’s hiring new employees to cover additional work or purchasing additional equipment.
Using Working Capital to Grow Your Business
All businesses, including auto shops, need working capital, it’s an essential part of the growth of any business. Requiring access to additional working capital via a loan is common among most business owners. Here are a few situations where you could benefit from a working capital loan.
- Hire new employees. The growth of your business is often fueled by the employees you hire.
- Investing in marketing. You can’t grow your clientele if you don’t spread the word. Investing in marketing is a smart way to get your name out there.
- Introducing new services. Incorporating new products or services will require an initial investment, but will be worth when you attract new clients.
- Launching a website. If you don’t have a website, consider investing in one so that clients can find you easily and learn about your products and services. If you have an existing website, sometimes an update is all you need.
Achieving Your Business Goals
Finding the right business financing for your auto shop should be at the top of your list of priorities when working to grow your business. Before you decided to apply, it’s important that you are prepared, have a plan, and understand what you can qualify for. Working with any type of lender is a partnership, find the right partner and you’ll be able to achieve all your business goals.
This article was contributed by Loans Canada, the nation’s original loan search platform.