Financial support for Car Repair and Garage Businesses

Running a car maintenance operation may be based on mechanical skills and knowledge but in order to work on modern vehicles, your garage business will depend on substantial investment. There is a constant need for new tools, diagnostics and repair equipment.

Workshop premises must meet modern health and safety regulations and, along with your working area, you will need a reception and customer waiting area, payment counter, back-office, toilets and parking spaces for customers.

You will also need insurance to cover buildings, vehicles and public liability. The business needs to meet demands for rent, business rates, electricity and refuse disposal, plus, you will almost certainly require a waste carrier licence from the Environment Agency to let you dispose of used oil, batteries and tyres.

You’ll also need to bring customers in. Clear signage, listings in trade and local directories and perhaps most important of all a professional website will all be required.

The equipment you will need

For starters, you will benefit from a computer, laptop or tablet and a printer. You will need an internet connection to contact suppliers, and the DVLA database if you are also to provide MOT testing and issue certificates.

You will also need to equip your workshop, and your minimum requirements may include:

• Complete set of hand tools in locker or trolley
• Compressor with tools and Air Impact Wrench Set
• 2 post lift
• Work bench
• Hydraulic floor and trolley jacks
• Engine Stand
• Engine hoist
• Axle Stands
• Spring Clamp
• Smoke Detectors
• Cooling system tester
• Injector Tester
• Compression Tester
• Automatic Vacuum Test Kit
• Engine Oil Pressure Tester
• Brake Pressure Test Kit
• Oil Drain/Extractor
• Battery charger
• Diagnostic machine
• OBD II Scanner
• Laptop Computer
• Multimeter
• Digital Wheel Balancer
• Wheel Alignment (computerized)
• Tire Changer workstation
• TPMS Scanner
• Grease pump
• Open Air Reel
• Oil Drain/Extractor
• Tire Inflation Gauge
• Injector Cleaner
• Buffer/Polishing Machine
• Spray Booth
• Spray Booth Compressor
• Body Workshop tools
• Automatic A/C Service Station
• Compressor Tester
• A/C Leakage Test Kit
• Key Programming Machine

The bill for equipment alone can top £100,000, even before you look at the costs of  providing a recovery vehicle, a van for collecting parts and one or more courtesy cars.

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

Your funding options

Finance solutions for garage services businesses include:

• Start-up Funding
• Asset Finance
• Premises Finance
• Merchant Cash Advance

Buying or setting up a garage business

Setting up as a trader will mean costs - for stock, insurance, and a website, premises and staff, as well as your equipment. Whatever the scale of your business plans, getting the necessary funding can be a challenge, as many lenders are often wary of start-ups and most prefer to see existing trading records as the basis of their decision making process.

At Rangewell we know lenders who are able to take a more positive approach, and can often help arrange funding for start-up ventures, based on solutions such as secured or unsecured loans.

We can also find solutions if you want to buy an existing business. Although the costs may be much higher than those required for a start-up, the ability to demonstrate profitability can help secure the finance you need. One solution for acquiring a business with existing assets is a ‘jigsaw’ finance deal, which uses a variety of funding types to  provide the most cost effective funding for each aspect of your finance needs.

Asset Finance - providing the equipment you need

Equipment costs will be a major hurdle when you are setting up vehicle service centre. You may be able to make some savings by buying reconditioned items such as a compressor and lift, but most equipment may be best acquired new to deliver the service, and reliability, you need.

Asset Finance solutions let you spread the costs of your equipment. They include a range of funding types, all with the big advantage of having the lending secured on the assets themselves. This means that the lender can simply repossess them if you don’t keep up repayments, reducing the risk to them and, hence, the cost to you.

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 6 and 60 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.

Items such as hand tools, and basic equipment such as trolley jacks, may be suited to HP.

Lease Finance

Leasing gives you flexibility. You are renting the asset, and can upgrade it as you need to. With some leasing arrangements, you have the option whether you want maintenance and insurance to be included.

Leasing may be appropriate for high cost items such as a specialised electronic diagnostic equipment which may need to be replaced or upgraded when a new model is introduced.

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 for use elsewhere in your business.

Find out more about Asset Finance and Asset Refinance solutions.

Funding for your premises

Your business will need secure parking for customers' vehicles and as large a workshop as possible. A leased unit in a prominent location may be a good first step, but you may need to borrow the deposit on a long-term lease as part of your business plans. An unsecured business loan could be a great way to help you raise the cash.

However, you could also consider buying premises - with a Commercial Mortgage - which can be used to buy land as well as buildings and, under some circumstances, can even be used to buy an existing business. Commercial Property Finance is arranged on an individual basis. Some lenders have a minimum of £75,000 or more, but there is no set upper limit.

If you already own your premises, taking out a Commercial Mortgage on it might be a cost-effective way to raise funds to use elsewhere in your business.  

Operating costs

Simply running and 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.

Business Loans

Borrowing is a simple solution and business loans can 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 often 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 loan 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 tailor to 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, which may be great news for you.

A Merchant Cash Advance, or MCA, is an innovative approach to raising funds.

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 here.

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 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 garage business is established and running.

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.

Luckily, 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 from the taxman.

How we help you capitalise your garage 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 all aspects of the garage sector. It means that we can help you find the most competitive rates for all types of finance solutions – from both the established lenders, and the new Alternative Funding providers.

We help businesses of all types find the most appropriate funding for them - from Garden Centre finance to finance for petrol stations and garages. Call us now to see how we can help you raise the finance you need for your garage business.