Guide

Why do banks turn down auto repair shops for loans?

Independent shops are small and asset-light on paper, so banks decline on size before they look at trade. Daily ticket revenue is steady and verifiable, which is precisely what a revenue-based funder underwrites — and it usually supports funding within a few business days rather than weeks.

Why the bank says no

Most independent shops fall below the revenue threshold a commercial lending team is set up to write. It is a size decision more than a risk decision.

The bays, the lifts and the diagnostic equipment are usually leased or financed, and the premises are usually rented, so there is little unencumbered to secure against.

Shops often run lean on paper for tax reasons, which is sensible and reads badly to a model looking at declared profit.

What each underwriter weighs

A BANKA REVENUE-BASED FUNDERPERSONAL CREDIT SCOREheavysomeCOLLATERAL TO PLEDGEheavynot looked atTWO YEARS OF TAX RETURNSheavynot looked atTIME IN BUSINESSheavysomeMONTHLY BANK DEPOSITSsomeheavyDEPOSIT CONSISTENCYnot looked atheavyINDUSTRY AND STATEsomeheavy
The same business, read two different ways. A bank decision is built on credit, collateral and filed accounts; a revenue-based funder builds it on the money moving through your account. That is the whole reason a bank decline says very little about whether you can be funded.

What a revenue-based funder reads instead

Daily tickets produce exactly the deposit pattern underwriting likes: frequent, consistent, and verifiable against card settlement.

The work is non-discretionary. Cars break regardless of the economy, and demand that holds through a downturn is a genuine underwriting positive.

Diagnostic equipment and lifts are financeable as equipment, which is cheaper than buying them out of working capital.

What to have ready before you apply

Six months of business bank statements, plus card processing statements if you have them.

Average monthly deposits — count both card and cash going through the account.

Whether existing equipment is financed and with whom.

Sources

Related questions.

My shop takes a lot of cash. Does that hurt?
Only if it does not reach the bank. Underwriting reads deposits, so cash that is banked counts and cash that is not does not exist as far as an application is concerned.
Can I fund parts inventory?
Yes. It is a short-cycle use — the parts become the ticket that repays it — and funders generally price that well.
Is a lift better financed than bought with an advance?
Yes. A lift secures its own loan over a term that matches its life, which costs considerably less than paying for it out of months of working capital.

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