Auto Repair Shop Feasibility Study in Arizona

Arizona repair loans run well above the class

The number that sets Arizona apart is the size of the typical loan. Across 283 SBA approvals to mechanical repair shops from FY2017 to FY2026, the median was $400,000, or 1.70x what this class borrows at the median nationwide. That median differs from both the Arizona all-asset book and the class nationally; neither Arizona floor, for cancellation or for charge-off, differs enough to stand out. The middle half of Arizona loans ran from $110,500 to $811,500, and gross approvals came to $178.8 million.

Repair lending also carries more weight in Arizona than its national share would predict. The location quotient is 1.24x, the state ranks 14 of 51 for these loans, and the class stands 5 of 39 among Arizona asset classes. SBA 7(a) accounts for 231 approvals and SBA 504 for 52. On the 504 side, Arizona Capital Source holds 20 loans and The Mortgage Capital Development Corporation holds 17 worth $17.3 million, with CDC Small Business Finance Corp. at 14. The 7(a) holders are led by U.S. Bank, National Association with 25, Wells Fargo Bank National Association with 17, Zions Bancorporation, National Association with 16 and Newtek Bank, National Association with 15. Live Oak Banking Company holds only 14 yet $21.6 million, a sign of fewer but much larger deals. Franchise brands sit behind 11.3% of loans, so most Arizona borrowers are independent operators.

Closing risk and credit risk in the Arizona file

Of the FY2017 through FY2024 approvals, at least 9.9% never funded and were cancelled; treat Arizona's still-undisbursed loans as lost too and the ceiling becomes 10.4%. For a borrower, that floor is the risk worth planning around: a deal can come apart after the commitment when the appraisal, the seller or the equity injection does not hold. Credit losses are lighter. Of 113 shop loans disbursed in FY2017 through FY2021, 3.5% have been charged off so far, and 2.7% failed inside their first five years. Each of those Arizona rates is a floor, since part of that cohort is still repaying.

What an Arizona shop study has to prove

With the median this far above the class, a lender will expect the study to show why the project needs the larger loan. Demand work starts with the trade area, and the county record matters: Maricopa County alone holds 190 approvals, with Pima at 25, Yavapai at 15 and Mohave at 13, so a shop outside Maricopa has a thinner local history to point to. Cost work should price bays, lifts and diagnostic equipment from current quotes. Debt service coverage has to hold from labor and parts margins at a loan near $811,500, not only near the median, and the Arizona appraisal has to carry the shop property apart from the going concern. A caution about how SBA files this Arizona class: truck service shares its code with car repair, while collision and paint shops, auto glass, quick lube and the remaining automotive repair codes are excluded, so their outcomes cannot stand in for this one.