Business financing can be a challenge for some auto and truck repair shops. Problems with cash flow are common for repair and body shops that deal with commercial clients or wait for insurance payments. In this post, we’ll go over five ways in which you can increase your auto repair shop’s cash flow.
Build a Cash Reserve
Slow payments from insurance companies and businesses can cause serious business financing issues, but building a cash reserve might help alleviate this problem. Use this reserve to cover the costs of running your repair company while you wait to be paid by customers. A cash reserve may not be enough in the long run, especially if your business is expanding. In that case, you could use some more business financing to supplement your cash reserves.
Offer Discounts for Early Payments
Consider giving your commercial and insurance clients an early-payment discount before applying for business financing. An early payment incentive is a quick and easy way to boost your cash flow. However, this option has a major drawback: early payments are optional. You will never know if your client will pay early or not, thus, this option may not completely fix any cashflow issues.
Financing Slow-Paying Invoices
Financing your invoices through a factoring program is yet another way to boost your cash flow. Getting funding for your business and insurance clientele through factoring programs is possible. The factoring company will pay you immediately instead of making you wait 30 to 60 days for payment on your bills. The business’s financial obligations can be met with the help of this cash advance.
Using Asset-Based Financing
Larger auto repair shops (those with monthly revenues over $1,000,000) may want to consider asset-based business financing. Your repair business can finance a wide variety of assets with the help of an asset-based financing solution. As a result, your liquidity will increase thanks to this approach.
Get a Bank Line of Credit
If your auto repair shop has been operating for a few years and has solid financial statements, consider getting a bank line of credit. Numerous financial institutions provide SBA-guaranteed loans to entrepreneurs (SBA). These loans are more convenient and tempting than traditional loans regarding terms and accessibility.
If managing cash flow has become a challenge for your auto repair shop, reach out to the team at Critical Capital Solutions today.