Auto repair companies are businesses with year-round demand. The improving economy means people have extra cash to make repairs that they may have let slide during leaner times. That’s good news for the owners of auto repair companies, but for many it also means expanding operations to meet demand.
This was the challenge facing one auto repair business owner in Canisteo, New York. He has been open since 1995 and averages $70,000 a month in gross sales. He had steady sales year-round, but wanted to expand his shop to increase his earning potential.
After seeing the requirements set by traditional bank lending, the auto repair shop owner explored alternative lending solutions. He said the banks’ requirements would have taken him months to pull together. With the merchant cash advance from Merchant Cash and Capital, the owner had his money in a week. Merchant cash advance services are an increasingly popular method of acquiring the fast capital needed for renovations, purchasing inventory, expansion and other needs.
Also known as a business cash advance, the rapidly growing popularity of merchant cash advance services is driven by relatively low personal credit requirements and the streamlined process of obtaining the cash advance. Prior to the economic downturn there were only about 10 firms in the U.S. providing merchant cash advance services, and today the industry has grown to more than 40 firms nationwide. In 2011, the nation’s largest providers of business cash advance services issued up to $8 million in working capital each month, which is up from $5 million in 2008, according to First Annapolis, a Linthium, Md., electronic-payments consulting firm. One of the largest firms of this type in the country, Merchant Cash and Capital has funded over $500 million since its founding in 2005 including many clients in the automotive repair industry.
But how exactly how does business cash advance services work for auto repair businesses? Merchant cash advances provide owners with working capital via a fast and easy process that is tailored specifically to businesses that accept credit cards. The cash advance firm purchases the future credit card revenues of the retailer at a discount. The amount of funding the business is eligible to receive is based on its average monthly credit and debit card processing volumes, and most businesses can typically qualify for one to two times that amount. The advance is paid back by remitting a small percentage of daily credit card processing receipts to the merchant cash advance company until the purchased amount has been collected. This will typically take anywhere from six to 12 months, depending on future sales. A typical advance can be structured in three to five days, allowing the business owner access to the capital needed to grow their business almost immediately.
Many auto repair business owners are also attracted to merchant cash advance services because of the relatively simple stipulations for qualifying for this type of financing—a stark contrast to the stringent terms attached to big bank loans. To be approved, the retailer must be open for at least six months, accept credit cards, and process an average of at least $5,000 per month in credit card sales. Additionally, retailers are not required to pledge collateral or post personal guarantees. Since the advance is paid back with a fixed percentage of future credit card sales, there are no monthly payments bearing down on the business owner every month.
Business cash advances are invaluable to businesses across a wide spectrum of industries, and many auto repair, auto body and other auto related industries take advantage of these services to help grow their inventory and increase revenue.
Even as the economic outlook gets brighter for small businesses across the U.S., banks haven’t shown signs of letting up on their tight lending and credit policies, and even business owners with solid credit ratings are being denied loans that are crucial to the success of their business. Seeking out alternative lending options like merchant cash advances is a viable option for retailers searching for working capital and helps many automotive business owners continue to operate and expand, despite the small business credit crunch.
