Auto Repair Shop Loans

Owners looking for options on their auto repair shop loans are often surprised to discover how many new loan programs that have become available, in the last 5 years. 30 year amortization periods and cash out refinance up to 75% LTV are on the market. However, automotive property loans are still heavily scrutinized by lenders that take a seroius look at the environmental status of the property. In addition, the special use nature of the properties as well as the high level of seller financing (land contracts) further complicate and make commercial real estate lenders concerned.

LTV - CLTV

Loan To Value restrictions on auto repair facilities are typically capped at 70% on rate and term and 65% on cash out refinances. However, there are a few lenders now that will allow up to 75% on a cash out basis. Lenders also will permit high leverage with seller held financing. The combined loan to value can be as high as 90%. For example, if the current first lien position existing convention loan is at 40% loan to value and the seller held is at 30% loan to value the owner could pull an additional 20% equity out on a cash out refinance (40% + 30% + 20% =90% CLTV).

DSCR

Debt Service Coverage Ratio restrictions are typically conservative at 1:1.3 for this building type. Meaning that for every $1.30 of net income (income after taxes, insurance, repairs, etc) the property/business produces, the mortgage payment will not be allowed to exceed $1.00.

Due to the cash nature of the auto repair industry, borrowers are often forced to look at the 7a loan option as it will allow debt coverage ratios as low as 1.1 AND allow the borrower to use projections to improve cashflow.

Property Analysis

Great caution will typically be used as market value and market rent is evaluated and compared to the subject property. Environmental status of the property will be examined and buildings constructed before 1997 will be further analyzed with serous attention to any under ground tanks. Appearance, location, accessibility, and local market conditions, as well as other factors are considered.

Credit Worthiness

The personal credit worthiness of the borrower will be scrutinized. 620 credit score is normally the minimum for the best finance options. The overall strength of the property, tenants, net worth, DSCR, and LTV can offset concerns of low credit scores.

We have some very strong auto repair shop loan options. For example we have a commercial 30 year fixed program and a no cost refinance program (excluding environmental insurance fee) for automotive building loans under $500,000. In addition we have a 5 year fixed SBA 7a program that is a good fit for auto repair shop loans.

Get pre approved now on your automotive property loan by filling out the commercial loan application.

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Commercial Finance Advisors, Inc.

261 E Maple Rd
Birmingham, Michigan 48009