Auto Repair Shop Feasibility Study in Colorado

A larger ticket than the class nationally

Colorado's mechanical repair borrowers ask for more money than their peers elsewhere. Across 380 SBA loans approved from FY2017 to FY2026, the median loan was $373,200, which is 1.59x the national median for automotive mechanical repair. That median is the single gauge on which Colorado shops depart, beyond our distinctness margin, from Colorado's all-asset book and from repair shops nationwide, so it leads this page. Half of all Colorado repair loans landed between $166,750 and $808,350, a band wide enough to hold an equipment refinance at one end and a shop purchase with its building at the other. Gross approvals came to $230.1 million.

The class is also more concentrated here than its national weight would predict. Its location quotient is 1.31x, Colorado ranks 9 of 51 states for these loans, and within Colorado the class stands 5 of 39 by loan count. SBA 7(a) carried 307 of the approvals and SBA 504 carried 73. B:Side Capital dominates the 504 side as current holder of 52 Colorado shop loans worth $35.3 million, so an owner buying real estate will most likely meet that certified development company. The 7(a) book is spread wider: Wells Fargo Bank National Association holds 27, U.S. Bank, National Association 24 and SouthState Bank, National Association 22, the last worth $18.4 million. Franchise concepts account for 10.3% of loans, so the great majority of Colorado borrowers run independent shops with no brand system behind their cash flow.

What the floors say to a Colorado lender

Of the Colorado repair approvals made in FY2017 through FY2024, 10.1% or more were later cancelled; if loans not yet disbursed are added, the ceiling becomes 11.0%. A cancellation can mean the deal changed shape between commitment and closing, whether through the appraisal, the seller or the borrower's equity. Charge-offs are low. Of 173 Colorado shop loans disbursed in FY2017 through FY2021, 2.3% have been charged off so far, and 1.7% of Colorado shop loans went bad before year five. Each figure is a floor, because that Colorado cohort is still paying and some loans in it may yet fail. The record says these loans have tended to perform once funded, and that the harder step is reaching the closing table.

Testing a Colorado shop project

A feasibility study for a repair shop in Colorado has to justify a loan larger than the class norm. On demand, that means counting vehicles and competing bays in the trade area; El Paso, Arapahoe, Adams and Jefferson counties hold the most approvals, at 55, 49, 47 and 41. On cost, it means pricing lifts, diagnostic equipment and any building work at current quotes rather than at the seller's figures. Coverage of debt service should come from the shop's own labor and parts margins, since a loan near $808,350 leaves far less room than one near the median. The appraisal has to carry the Colorado real estate by itself, separate from the going concern. One caution on the data: Colorado truck service cannot be separated from car repair, because truck repair shops share the car repair code, while collision shops doing body, paint and interior work fall outside the class, as do auto glass, quick oil change and every other automotive repair code.