Finance for MOT Services

At a maximum cost of £54.85 for cars and £29.65 for motorbikes MOT testing can provide a small income which might struggle to cover your costs. The real potential comes from a steady stream of lucrative repair work for MOT failure rectification.

But you will need to meet a number of legal requirements if you want to set up an MOT test station – and there will be some major costs.

You need suitable premises and approved equipment for the vehicle classes you want to test, an authorised examiner (AE) an individual, partnership or company authorised by the Driver and Vehicle Standards Agency (DVSA).  And an MOT manager to run the service and at least one MOT tester who have taken the approved courses.

The equipment you will need

You will need a computer, laptop or tablet with internet connection, and a printer to contact the DVLA database and to print and issues MOT certificates and notices.

You will also need a range of equipment:

• A vehicle lift with suitable capacity for the classes of vehicle you are checking
• Brake pedal application devices
• Decelerometers  - category A are approved for all classes of vehicle
• Diesel smoke meters
• Exhaust gas analysers (catalyst vehicles)
• Floor/pull along brake testers
• Headlamp aim testers
• Plate brake testers
• Roller brake testers
• Speed limiters
• Towbar socket testers
• Tyre tread depth gauges
• Wheel play detectors

You will also need a compressor and all the standard garage tools to allow you to handle rectification work. The tools for equipment alone can add up to £40,000, and the costs of acquiring premises and setting them up for MOT testing can mean that cost is just the beginning.

This can seem daunting, but if you have the necessary experience in the trade and can put together a sound business plan, at At Rangewell we can help you find ways to raise the funds you need.

Your funding options

Finance solutions for MOT services include:

• Asset Finance
• Premises Finance
• Secured and Unsecured Loans
• Merchant Cash Advance
• Tax Loans
• Working Capital Finance
• Funding for growth

Asset Finance  - providing the equipment you need

Equipment costs will be a major hurdle when you are setting up an MOT centre, and while you may be able to cut corners with a secondhand lift, most equipment may be best acquired new if it is to deliver the service, reliability and accuracy you need.

Asset Finance solutions let you spread the costs of your equipment and repay the lender while it is are already working for your business. Asset Finance solutions include a range of funding types, all designed to help you acquire the equipment you need. Asset Finance has a major advantage over other types of funding. Because the lending is secured on the assets themselves - meaning the lender can take them and sell them if you don’t keep up repayments - the risk to the lender is reduced. This means that the interest rate they charge you can be reduced with it, cutting your monthly costs.

Why not use equipment dealer finance?

Of course, it is simple enough to get finance from the dealer when you buy garage equipment. But the fact is that dealer finance could be a costly option. Even if they offer 0% finance to help them close a deal, the purchase price will be inflated to pay for the finance.

You could be better off asking for their best price for cash, and getting finance from a specialist lender. Your overall costs and monthly payments could both be reduced.

Asset finance solutions include:

Hire Purchase

Hire Purchase works exactly as it sounds. You ‘hire’ the equipment until you’ve paid enough to ‘purchase’ it.

With HP, you can pay for the equipment you want for the long term with fixed monthly repayments, letting you manage your cashflow better. Arrangements generally last between 12 and 72 months. You pay a deposit plus fixed monthly instalments for the agreed term, after which the assets become yours – which can allow you to continue to use them, or to sell them on.

Lease Finance

Leasing gives you flexibility. You can regularly upgrade your vehicles, and in some leasing arrangements, you have the option to own them at the end of the term, or simply return them and take out another arrangement on a new vehicle.

You can also decide whether you want maintenance and insurance to be included, and whether you need the truck for its whole working life or a shorter, agreed period.

Contract Hire

Contract Hire is another type of Asset Finance arrangement often used for vehicles - and could be ideal if you need a van or a recovery vehicle. It lets you work with the latest vehicles, budget ahead in confidence and avoid the risks associated with vehicle ownership – like maintenance costs and depreciation.

You set up a contract with a finance company which will buy the vehicle you need, and let you hire it for a fixed period, with an agreed mileage. They will be responsible for maintenance, and will simply repossess the vehicle at the end of the contract, allowing you to acquire another new one with a new contract.

Payments are calculated on the purchase value less the estimated value of the vehicle at the end of the agreement. This helps keep your monthly repayments down, because the vehicle will be sold on by the finance company. You are, in effect, financing the vehicle only for the time when you are using it. This has the benefit of making it easy to switch to a new vehicle at the end of the agreement.

Asset Refinance - Making existing payments easier

If an existing finance arrangement is causing problems, or if you want to redirect cash elsewhere in your business, we may be able to help find a refinance option. A lender will pay off what you owe under your original agreement and set up a new finance arrangement.

This can mean reduced repayments, spread out over a longer term. It could also allow you to release a substantial cash lump sum if you wished to refinance a large fleet.

Find out more about Asset Finance and Asset Refinance solutions.

Funding for premises

Your garage business will need suitable premises, and starting an MOT side to the business will mean some precise specification which you will need to meet to be approved by the DVSA.

Leasing suitable space may be the most versatile solution. Prices will vary across the country. Commercial property owners don’t like space being vacant, so you might be able to negotiate. You may need to borrow for the deposit on a long-term lease.

An Unsecured business loan could help you raise the cash.

Alternatively, you might want to consider using a Commercial Mortgage to buy premises outright. Because they can spread the costs over 20 years or more, Commercial Mortgages may sometimes be arranged at monthly costs similar to a lease, and help you buy an appreciating asset for your business. You may need to provide a deposit of around 40%, and it is uneconomical to borrow less than £50,000, but there is no set upper limit.

Commercial Property Finance is arranged on an individual basis. Get our help finding the most competitive lender.

Buying an existing MOT business

You could avoid the costs of setting up an MOT business by buying an existing garage business with an established MOT service. You will be able to see the profit that can be generated by the business - and so will potential lenders, who will be more enthusiastic about lending to an established and profitable business.

A Secured Loan could help you to borrow the large sums required for a buy in our buy out of an existing garage business. You might also consider ‘jigsaw’ funding. This is a bespoke finance package, made up of a number of loan types, such as a Commercial Mortgage for the premises, with other loans to cover goodwill, and Asset Finance for your equipment.

Contact us to find out more about funding for buy-ins and buy outs. 

Operating costs

Simply operating your business will also mean costs – for staff, utilities and other overheads, until you start to show a profit. There are a number of ways to provide for these costs.

Borrowing is a simple solution. Business loans may be Secured or Unsecured.

Unsecured Loans are like personal loans, but based on the creditworthiness of your business, and don’t involve holding any of your assets as security. Loans are repaid in monthly or quarterly instalments over an agreed term, usually under 5 years.

Modern lenders can provide fast Unsecured lending, but you might need to provide a personal guarantee.

You usually can’t borrow more than one month’s turnover without security, and most Unsecured loans providers will not lend more than £250,000. For a new business operation, many lenders might only be prepared to offer a Secured Loan.

Secured Loans are ‘secured’ because the lender will require security in case you cannot pay the loan back. This could be your home, or your business premises.

Providing this security means that the lender can give you longer to repay, and lower interest rates. This means that monthly repayments can be easier to fit in with your cashflow, and it may be possible to borrow larger sums of money if you can provide suitable security.

Our lending teams can discuss your needs, and help you find the kind of loan to fit your business needs.

Merchant Cash Advance

Many customers will pay for their MOT and repair work with a credit or debit card.

Merchant Cash Advance, or MCA, is an innovative approach to raising funds based on your merchants account you use to accept card payments.

An MCA is not a loan. It is actually an advance based on your future revenues from credit card sales, the funds flowing through your merchant account.

It is repaid - along with fees - by a percentage of every card transaction your business makes. Unlike a loan, an MCA makes no interest charges, just a fixed fee that you know upfront. A small business can apply for an MCA and have an advance deposited in a matter of days, ideal if you have a cash shortfall or an unexpected expense.

Find out more about Merchant Capital Advances.

Tax Loans

Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems for your cashflow, particularly when it falls at the same time as other costs.

Funding is available to let you spread the cost of your tax demands into affordable monthly payments. This will help ensure that your garage can avoid cashflow problems, and makes it easier for you to budget ahead - and avoid trouble form the taxman.

Find out about Tax Loans.

Working Capital Finance

The early days of any business are challenging.  As its name suggests, Working Capital Finance is designed to boost the capital available to your business when it is not generating sufficient capital itself. It's often used to provide cash to pay staff and operating cost while business is slow during the early stages or during a period of growth when your cashflow is already stretched. It is usually designed to be repaid in the short- to medium-term, once your gym is established and running.

Find out about Working Capital Finance.

How we help you capitalise your MOT operation

At Rangewell we work across the entire lending industry, and we have finance experts with personal experience in the needs of the garage sector.

Their expertise works for you. Our team knows the lenders who specialise in the garage sector. It means that we can help you find the most competitive rates for all types of vehicle finance solutions – from both the established lenders, and the new Alternative Funding providers.

Call us now to see how we can help you raise the finance you need.