What is a Business Loan for Car Dealerships?
A business loan for car dealerships is a customised form of financing designed to support entrepreneurs in starting, expanding, or acquiring car dealership businesses. These loans encompass various options like unsecured and secured loans, inventory financing, and floor plan financing, tailored to meet the diverse needs of the automotive sales industry.
Functioning of Car Dealership Business Loans
Typically, these loans are repaid in monthly instalments with interest. The specifics, such as repayment terms and amounts, depend on the loan type and duration. Credit checks are standard practice for lenders to ensure responsible borrowing. Given that the initial investment for car dealerships can be substantial, securing a business loan is often an essential step.
How can I apply for a loan for my car dealership?
If you are the business owner of a car dealership and are looking for funding, you can apply for a business loan by applying online via the For Kredit website.
We’ve got a quick and easy online application that allows businesses to submit an application in a matter of minutes.
How much money can I get from a loan for my car dealership?
Car dealership businesses that are applying for a revenue-based loan can borrow between £1,000 – £500,000 when they apply online with For Kredit.
Is my car dealership eligible for a business loan?
Car dealerships are able to qualify for revenue-based business loans if they meet the following criteria:
- Proof that the business has been trading for a minimum of 6 months.
- The car dealership must generate £1,000 in monthly card sales.
- The business owner is a UK resident and over-18 years of age.
- The business is a limited company.
How does a business loan benefit my car dealership?
Raise capital when you need it
The revenue-based loan provides business owners with the option to inject cash into their business if they’re having some issues with working capital or cash flow. Successful applicants can be approved within 24 hours of their application being submitted, meaning that businesses can receive funding quickly.
Flexible funding option
One of the benefits of a revenue-based loan is that loan repayments coincide with the performance of the car dealership. This means if the car dealership makes more sales in one month, a larger proportion of the loan is repaid. If it is quiet in the next month, the loan is still repaid but with a smaller amount.
This makes it different from other finance options such as traditional bank loans which require repayment regardless of the business’ performance.
What types of businesses can apply for a business loan?
Business loans is suitable for businesses from a variety of industries provided that they accept card payments. Businesses that apply for a funding option include:
Various Business Loan Options for Car Dealerships
Unsecured Business Loans
Unsecured loans are provided without the need for collateral and are known for their swift processing. They are particularly suitable for immediate requirements like showroom enhancements or short-term inventory expansion.
Secured Business Loans
For accessing larger sums and more competitive interest rates, secured loans are the preferred choice. These loans require collateral, typically in the form of property or high-value assets, and are repaid over a set period.
This specific loan type is tailored to fund the purchase of vehicles for the showroom. It’s a convenient way for dealerships to maintain a diverse and attractive inventory without tying up all their capital.
Floor Plan Financing
A unique form of financing, floor plan loans are used to finance vehicle inventory. The loan is secured against each vehicle, and as each vehicle is sold, the corresponding portion of the loan is repaid.
Assessing the Need for a Car Dealership Business Loan
The requirement for a business loan varies based on the dealership’s available capital and growth objectives. With the dynamic nature of the automotive market, a well-funded dealership is more likely to succeed and grow.
Alternative Funding Options
Personal Loans from Friends and Family
This informal borrowing option can offer favourable terms and is often quicker to arrange, sometimes even interest-free.
Venture Capital or Angel Investment
Such investments do not require repayment in the traditional sense but typically involve giving up a share of business ownership.
Crowdfunding is an effective way to gather funds from a large number of people, typically through an online platform.
Government Grants and Incentives
These are challenging to secure but can be highly beneficial as they do not require repayment. However, they often come with specific criteria that need to be met.
Bad Credit and Car Dealership Loans
Car dealerships with less-than-perfect credit histories still have access to loan options. Alternative lenders tend to consider a broader range of factors, beyond just credit history, when assessing loan applications.
Eligibility and Application Process for Car Dealership Loans
The eligibility criteria for car dealership loans typically include being a registered business in the UK, over the age of 18, and having an operational history of at least three months. The application process usually begins with a simple online form.
Why Choose For Kredit for Your Car Dealership Loan?
For Kredit specialises in assisting businesses, including car dealerships, in navigating the complexities of the finance market. They provide a complimentary loan comparison service and have a proven track record in helping businesses secure appropriate funding.
Q: How can I choose the right type of loan for my car dealership?
A: Evaluate your dealership’s financial needs, repayment capacity, and ability to provide collateral. Unsecured loans are quicker to secure but might come with higher interest rates, whereas secured loans offer larger amounts with more favourable rates.
Q: Is it possible to obtain a car dealership loan with a limited business history?
A: Yes, some lenders are willing to work with businesses that have a relatively short operational history, although the available options may be more limited compared to established dealerships.
Q: Can I use a business loan to purchase an existing car dealership?
A: Absolutely, both secured and unsecured loans are available for the acquisition of an existing car dealership. The choice of loan should be based on the required amount and your dealership’s financial standing.