Auto Repair Shop Funding: The Essential Guide to Auto Shop Loans

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Understanding your funding options and applying for the right small business loan for your business can be confusing. Our Industry Funding guides make it easy to compare your funding options and choose the right loan for your business, whether you’re just starting up or are looking to grow an existing business.

Getting Started with Auto Repair Shop Loans

Auto repair shops service passenger cars, light and heavy commercial vehicles, bikes, and scooters by carrying out a number of maintenance functions, including:

  • Mechanical and electrical repair and maintenance, such as transmission repair, electrical system repair, engine repair, and exhaust system replacement
  • Auto body repair
  • Paint
  • Interior care
  • Glass repair

The global auto repair market is expected to grow 11.4% in 2022 over 2021, with future projected growth of 10.3% through 2026. Though the industry is growing, repair shops are facing a number of new challenges in 2022.

According to a 2022 study conducted by, prior to the COVID-19 pandemic, independent auto repair shops listed their biggest challenges as finding time for hands-on technician training, staying up to date with advances in diagnostics, keeping up with advances in vehicle technology, and finding knowledgeable and motivated technicians.

In 2022, independent repair shops are faced with new challenges primarily relating to parts shortages and supply chain issues:

  • 35.8% of independent auto repair shops say finding parts or parts shortages are their biggest challenge
  • 31.8% identify bringing customers back and providing incentives as their biggest issue
  • 29.4% note that finding affordable parts is their main difficulty
  • 27% say getting parts on time is their biggest challenge

Many auto repair shops, especially independent operators, are struggling to protect their margins as parts become increasingly difficult to find, demand for services grows, and wages increase. Unprecedented labor and supply chain pressures, as well as the increased adoption of hybrid and electric vehicles, will drive significant changes in the auto repair industry in 2022, pushing operators to cut costs by adopting new technology and investing in new equipment and training to offer more services that suit the changing needs of drivers.

Auto repair loans can help bridge gaps in cash flow and provide the financing you need to invest in new technology and innovation that will help reduce costs, increase efficiency, and improve profit margins.

Auto Repair Shop Loan Options

Multiple types of funding are available to help auto repair shops overcome challenges and continue to grow. Long- and short-term funding is available, as well as secured and unsecured loans, including:

  1. SBA auto repair shop business loans
  2. Bank loans for auto repair shops
  3. Alternative funding
  4. Lines of credit
  5. Equipment financing

Let’s take a closer look at these options:

1. SBA auto repair shop business loans

The Small Business Administration (SBA) doesn’t directly provide auto repair shop loans—instead, funding is approved and disbursed by partnering commercial lenders like banks or credit unions, and is guaranteed up to 85% by the SBA. This reduces the risk to the lender and, in theory, encourages them to grant more loans to auto repair shops.

SBA auto repair shop loans have the lowest rates and longest terms because the risk to the lender is lower. However, SBA loans have the most rigorous application process, with the strictest eligibility and most extensive documentation requirements. Some estimates suggest that it can take up to 30 hours to compile all the information you need, and it can take weeks or months to get a decision from your lender with no guarantee of approval. Most applicants are rejected, especially if they have no collateral, a history of unstable cash flow, are seeking short-term funding, or are operating in a higher-risk industry such as auto repair.

SBA loans are typically term loans. Multiple types of SBA funding are available—here are two of the most popular:

  • 7(a) Guaranteed Loans: 7(a) loans are the most popular SBA auto repair shop business loans. Funding up to $5M is available with the longest repayment terms and lowest rates and no restrictions on how funds are used. Collateral is often required, but Express loans are available with a 36-hour turnaround and no collateral requirements for loans under $25,000.
  • 504 Local Development Company Loans: These loans are long-term, fixed-rate loans that are often used to purchase real estate. This funding is provided by Certified Development Companies through commercial lending institutions, and requires the borrowing business to use their financing to create or retain jobs, or to uphold other public policy goals such as rural development, revitalizing a business district, or supporting minority-owned businesses.


  • Lowest rates and typically better terms
  • Large loan amounts are available, up to $5 million
  • Most applicants are rejected, especially those with low credit
  • Extensive application requiring years of detailed business and personal financial information
  • Can take weeks or months to process with no guarantee of approval
  • Some loans restrict how you can spend your funds

2. Bank loans for auto repair shops

Auto repair shop owners may also be able to access the funding they need through commercial lenders like banks or credit unions.

Most often, bank loans for auto repair shops are term loans that are repaid over a set period of time with fixed or variable interest rates. Terms and rates are typically competitive, but may not be as low as the SBA since the loan is not guaranteed, and will depend on the size of the loan and your credit history. Collateral may also be required.

Commercial lenders often have strict approval requirements, but they may not be quite as strict as the SBA, especially if you have an existing relationship with your lender. Banks tend to prefer granting loans for larger amounts or loans to large businesses with collateral, which means that auto repair shops and other higher-risk industries with unstable cash flow may find it tough to get the funding they need from these sources. Similar to the SBA, applications can take weeks or months to approve, and most applicants are rejected.



  • Low rates and good terms depending on size of loan and credit history
  • Slightly less strict application requirements than SBA loans
  • Many applicants are rejected, especially small loan amounts and applicants with low credit
  • Extensive application requiring detailed business and personal financial information
  • Can take weeks to process, with no guarantee of approval
  • Some loans restrict how you can spend your funds

3. Alternative funding

Alternative funding from direct online lenders like Greenbox Capital® emerged from the 2008 recession in response to a greater need for accessible small business funding. Loans from these lenders are typically easier to acquire than bank or SBA loans, with flexible approval requirements that place less emphasis on your credit score, fewer documentation requirements, and faster turnaround—sometimes in as little as one business day. Collateral is also typically not required.

Because approval requirements are more flexible, rates may be higher than other types of auto repair shop loans. Repayment terms are often daily or weekly, depending on the type of alternative funding you receive.

Multiple types of funding are available from these lenders, including more traditional forms of funding like lines of credit and real estate collateral loans, as well as innovative non-loan forms of financing like merchant cash advances and invoice factoring:

  • Merchant cash advances provide a cash advance in exchange for a percentage of your daily or weekly credit and debit card sales. Also known as a “purchase of future receivables”, MCA payments are automatically deducted based on your daily sales, which means days with higher sales will have higher payments and days with fewer sales will have lower payments. MCAs are ideal for businesses that process a lot of card transactions. Learn more about merchant cash advances.
  • Invoice factoring helps auto repair shops leverage their unpaid invoices in exchange for working capital. Also known as accounts receivable financing, invoice factoring enables a business to sell their outstanding invoices to a lender, called a factor, in exchange for an advance of working capital. The lender will provide up to 90% of the invoice’s value up front and pay out the remainder (minus any fees) when the invoice is paid. Invoice factoring is ideal for businesses that have long accounts receivable periods or large invoice values, such as auto repair shops that service corporate clients or work with insurance providers. Learn more about invoice factoring.

Alternative lenders may also have special funding programs for underserved communities, such as women- or minority-, or veteran-owned businesses.



  • Faster approvals with funds deposited in as little as 24 hours
  • Easier lending requirements
  • No restrictions on how funds are used
  • More likely to fund younger businesses
  • Higher rates
  • Daily or weekly repayment terms depending on type of funding

4. Lines of credit

Lines of credit are similar to business credit cards, but with longer terms and lower rates. They are one of the most flexible forms of auto repair shop business loans, allowing auto shop owners to draw and repay from the line at any time.

There are no restrictions on how line of credit funds can be used, and you’ll only ever pay interest on the amount borrowed. This makes lines of credit ideal for covering unexpected expenses, financing occasional large purchases of inventory or equipment, or managing other major expenses that don’t require a larger loan but can still strain your cash flow.



  • Only pay interest on the amount you borrow
  • Draw and repay funds as needed
  • No restrictions on how you spend your funds
  • Lower rates and higher limits than business credit cards
  • Tougher application requirements
  • Lower amounts than other forms of funding

5. Equipment financing

Equipment financing is designed specifically to finance the purchase of new equipment, such as vehicle scanners, air compressors, digital vehicle inspection tech, tools and equipment to service hybrid and electric vehicles, jacks and jack stands, hoists, cabinets and workbenches, creepers, and more.

Lenders will typically cover 80-100% of the cost of the new equipment and the equipment will serve as collateral to secure the loan, which may result in lower rates. These loans are often repaid in monthly installments, with a term length that corresponds to the length of time your lender expects the equipment will last.



  • May be easier to qualify for because equipment serves as collateral
  • You own the equipment instead of leasing it
  • Funding can only be used to purchase specific equipment
  • Very specific equipment or equipment that goes out-of-date quickly may have higher interest rates

What Are The Best Auto Repair Shop Loans?

The best auto repair shop loan depends on your goals. Your funding, including the amount you borrow and your repayment terms, should always be used to serve a specific purpose that aligns with your business goals, such as renovating your shop to add more bays, hiring more mechanics, or investing in new tools and technology so you can service hybrid or electric vehicles.

For short-term funding, non-loan forms of financing like merchant cash advances can provide a fast infusion of working capital. This type of funding can be used to hire staff, purchase inventory or technology, fill in cash flow gaps, or market your auto repair shop.

For long-term funding, SBA and bank loans are the best option. SBA auto repair shop loans offer the best rates but are the most difficult to acquire. Bank loans will offer similar rates and terms and may be easier to acquire if you already have an existing relationship with a lender. However, both SBA and bank loans can be tough for auto repair shops to access due to perceived risk and industry volatility. Some alternative lenders also offer long-term funding options with easier approval requirements, such as small business loans and collateral business loans, but rates may be higher.

For fast funding, alternative lenders are always your best bet for an auto repair shop business loan. These lenders can approve and deposit funds in as little as 24 hours, while the SBA and banks can take months to assess an application with no guarantee of approval.

How To Use Auto Repair Shop Business Loans?

As the auto repair landscape shifts due to supply chain challenges, parts shortages, and changing driving preferences, shop owners will face a number of opportunities to grow, such as:

  • Improving shop space: Auto repair shop loans can provide the funds you need to renovate your existing space or expand to a larger garage, install larger garage doors so you can service more or larger vehicles, or add technology and equipment so you can offer more services.
  • Hiring staff: Hiring additional staff can help you service more vehicles, whether you take on more mechanics or hire administrative or support staff so you can focus on repairs and service instead of paperwork. Auto repair shop loans can provide the funds you need to hire and train new employees, or even develop internship or apprenticeship programs with local colleges to create a hiring funnel for new talent.
  • Chip shortage: COVID-19 and the resulting semiconductor chip shortage have led to a shortage of new vehicles. As a result, more people are buying used vehicles or maintaining their current car instead of replacing it, presenting auto repair shops with an opportunity to leverage increased demand for auto repair and maintenance services. Auto repair shop business loans can be used to help take advantage of these opportunities, whether you invest in marketing and advertising, purchase new equipment, or renovate your shop space to fit more vehicles.
  • Electric vehicles: According to, 75% of independent repair shops report that a portion of their business comes from servicing hybrid electric vehicles (HEVs), while 67% report business from battery electric vehicles (BEVs). Of the independent repair shops that service these vehicles, nearly 88% of shops that service HEVs and nearly 90% that service BEVs have seen an increase in the number of these vehicles coming into their shop in the last two years. Servicing HEVs and BEVs may require shop owners to invest in new technology, tools, or training. Auto repair shop loans can provide the working capital you need to upgrade your technology and cover continuing education costs for your technicians.
  • Advertising: Whether you opt for online advertising, partnerships with dealerships or other local businesses, sponsoring local events, or whatever strategy makes sense for your shop and your community, auto repair shop loans can supply the funding you need to reach new customers online and through traditional media.
  • Diagnostic devices: Auto repair shops are increasingly installing diagnostic devices in customer vehicles to track vehicle condition and identify problems. These devices feature automated systems that can identify potential issues, ensure parts are on hand, and connect with customers to complete the required repair. Auto repair shop business loans can be used to purchase these devices so they are available to install when customers opt in, leading to increased revenue down the line as problems are proactively identified and repaired.
  • Artificial intelligence: AI systems can be used to inspect vehicles, and capture and compare images with standards to identify deviations and required repairs. These devices can save time and reduce costs by allowing mechanics to focus on repairs instead of diagnostics, but may require a significant investment of capital to purchase. Auto repair shop loans are ideal for purchasing this technology, which in turn will help you service more vehicles faster and generate more profit.
  • Training and OEM certifications: Auto repair shop loans can cover tuition costs so you can work closely with OEMs and ensure that your technicians have the proper certifications and training to conduct repairs reliably.
  • At-home/mobile services: Use auto repair shop funding to implement and advertise new remote services for simple maintenance like oil changes, tire changes, or other minor repairs and maintenance that can be done at customers’ homes.
  • Technology: New technology can help streamline shop operations like invoicing, managing inventory, handling vendors, and creating repair orders, while also reducing your reliance on outdated paper records. Automating simple tasks and streamlining paperwork helps ensure that your staff can work as efficiently as possible so you can service more vehicles and earn more revenue. Auto repair shop loans can provide the funding you need to invest in these technologies without straining your cash flow.
  • Update your website: Use auto repair shop funding to build a new website or update your existing one to better suit the changing needs of customers. Adding options to schedule appointments online, especially for routine scheduled maintenance, pay invoices online, or otherwise make the auto service experience easier for customers can help set you apart from your competitors so you can earn more business.

Auto repair shop loans can also help shop owners overcome the unique challenges of their field, including:

  • Parts shortages: Parts shortages are a persistent problem across the entire auto repair industry, leading to longer repair times and greater costs for customers. Auto repair shop loans can provide the working capital you need to navigate parts shortages without putting further strain on your cash flow, such as developing partnerships with local salvage yards, covering increasing part costs, or strengthening relationships with suppliers.
  • Competition: Competition with larger shops and dealerships is the most commonly reported long-term challenge for shops with 1-3 bays. Auto repair shop business loans can help you meet this challenge by providing the funding you need to advertise your shop and reach new customers, purchase new tools and technology to service newer vehicles such as HEVs or BEVs, or develop partnerships with other local businesses such as salvage yards or dealerships.
  • Older vehicles: Newer vehicles are more reliable and require less service. However, many drivers are opting to keep their existing cars on the road for longer—the average age of vehicles on the road grew by more than 20% since 2002, from 9.6 years to 11.9 years. Auto repair shops are seeing a higher number of older vehicles come through their service doors, but it can be hard to find parts for these vehicles if they have been discontinued by the original manufacturer. Using auto repair shop loans to strengthen relationships with parts suppliers and salvage yards or hire technicians who are familiar with older model vehicles can help you provide the service your customers need with less disruption.
  • Cost of equipment and tools: Safety equipment such as gloves, jumpsuits, steel-toe boots, goggles, and welding masks, as well as repair equipment like tools, diagnostic equipment, drills, lifts, creepers, jacks, and air compressors are expensive but necessary to run a successful auto repair shop. Auto repair shop business loans can be used to purchase this equipment without placing additional strain on your shop’s day-to-day cash flow.
  • Cost of inventory: Engine parts, nuts and bolts, fluids, batteries, and other parts all require an outlay of working capital to purchase and keep on hand to reduce service times and improve service. Use auto repair shop loans to purchase inventory in advance so you can provide the best possible service to your customers.
  • Payment delays: Auto repair shops who work with insurance companies or corporate clients often wait 30-60 days for these clients to pay their invoices. This can create cash flow challenges, especially as shops contend with parts shortages and other issues. Auto repair shop loans such as invoice factoring can be used to bridge cash flow gaps and allow you to offer early payment discounts with negotiable terms.
  • Leasing: Vehicle leasing in the USA has quadrupled between 2009 and 2016, putting auto repair shops in a difficult position as drivers opt to take leased vehicles to dealerships for repair and maintenance. Auto repair shop loans can provide the funding you need to develop new programs to attract clients, or create partnerships with leasing companies or dealerships to handle overflow repairs.
  • BEVs: Based on average recommended service intervals, BEVs may require approximately 30% fewer maintenance visits, with lower levels of maintenance needed for each service appointment. With less need for service, auto repair shops will need to find ways to reach new customers, such as offering different services or remote or at-home maintenance. Auto repair shop loans can help you implement these strategies, as well as invest in technology and training to service BEVs.
  • Telematics: Newer vehicles feature increasingly more telematic features, advanced driver assistance systems, and connectivity options that require different skills to repair. Investing in the tools, systems, and training needed to service vehicles with these features can create a significant strain on your cash flow. Auto repair shop funding can be used to pay for training and new certifications to keep your shop on the cutting edge.
  • OEM control of service: The increasing complexity of new vehicles requires more sophisticated technology and training. The integration of hardware and software needed to service newer vehicles, such as diagnostic tools and training or certifications, can be costly for non-OEM providers like independent repair shops. Auto repair shop loans can provide the funds you need to invest in OEM-certified technology and training so you can work in conjunction with OEMs.

How To Apply for Auto Repair Shop Loans

Traditional lenders consider auto repair shops to be a higher risk industry, which means applicants will have more hurdles to overcome when applying for funding from lenders like the SBA or a bank.

Make sure you have a firm understanding of your auto repair shop’s background and financials before you apply, including:

  • Your operating history
  • Revenue and profitability
  • Personal and business credit scores
  • Collateral

It’s also a good idea to prepare your financial statements and documentation in advance in order to reduce any wait times. Compile the following documentation before you apply:

  • Bank statements
  • Profit and loss statements
  • Personal and business tax returns
  • Cash flow forecasts

You may also need to provide a business plan or purpose statement when you apply for an auto repair shop loan. Traditional lenders will require a detailed plan outlining how you plan to use your funding, as well as how you plan to repay it, while alternative lenders are typically satisfied with a purpose statement. It’s best to have this information prepared ahead of time in order to reduce any delays in receiving your funding.

Check out our small business loan documentation checklist for a comprehensive list of required paperwork. Get a small business loan.

Frequently Asked Questions

How much does it cost to open an auto repair shop?

5/5 - (5 votes)

Estimates suggest that it costs between $37,500 and $50,000 to open an auto repair shop, including equipment, tools, space, and insurance. These estimates do not include salaries and wages for yourself or your employees.

Can I get a government grant for my auto repair shop?

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There are no federal government grants specifically for auto repair shops, but there may be state or corporate grants available depending on your location. Business owners in underserved communities, such as women-, minority-, or veteran-owned auto repair shops may be able to access government grants for their auto repair shop.

What are car repair loans?

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Car repair loans are personal loans used to cover emergency car repairs by breaking the repair costs down into smaller, more affordable payments. Car repair loans can be found online or from banks in the form of a line of credit. Some auto repair shops also offer financing programs with a partnered lending company.

Greenbox Funding Options for Auto Repair Shops

As an alternative lender, Greenbox Capital® can approve more auto repair shop loans than traditional lenders. We can also approve loans for auto repair shops faster, with funds deposited in as little as 24 hours. We offer several types of auto repair shop funding to help grow your business, including merchant cash advances, invoice factoring, lines of credit, and more, with funding from as low as $3,000 up to $500,000.

Greenbox Capital funds all auto repair specialties. Our expert Funding Advisors will work closely with you to determine which funding option will help you achieve your goals without compromising your business’s cash flow.

Learn more


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  2. Challenges for independent repair shops in 2022.” April 26, 2022.
  3. Current and Future Challenges for Independent Repair Shops – 2022.”
  4. Growth Opportunities in Auto Service and Repair: The Road Ahead.” Robert Haslehurst and Emile Santos. February 23, 2022.
  5. Impact of Battery Electric Vehicle and Hybrid Electric Vehicle Repair and Service at Independent Repair Shops.”
Jordan Fein
Author: Jordan Fein
Contributor and expert in finance and loans, business and economics