Auto Repair Shop Feasibility Study in Ohio

Many small loans, one dominant bank

Ohio finances more mechanical repair shops through SBA than almost any state, and it does so in small pieces. The 480 loans approved from FY2017 to FY2026 total $109.7 million, with the state at 5 of 51 nationally and repair shops at 5 of 39 within Ohio, yet the median loan is only $70,000, or 0.30x the national median for car and truck repair. The middle half of loans runs from $34,250 to $248,125. No metric in this cell departs from Ohio lending as a whole by more than Loan Analytics' margin, so the small ticket matches Ohio lending as a whole. The location quotient of 0.83x adds that repair shops take a somewhat smaller slice of Ohio's SBA lending than they do nationally, even with the high count.

The lender list explains the shape. The Huntington National Bank holds 266 of these loans for $38.2 million, far ahead of U.S. Bank, National Association at 27 loans and $4.2 million, KeyBank National Association at 13 and $2.5 million, and PNC Bank, National Association at 11. Most of those 266 loans are small, given the $70,000 median. SBA 7(a) accounts for 452 loans and SBA 504 for only 28, led by Community Capital Development Corporation with 9 loans and $4.2 million and Ohio Statewide Development Corporation with 8. Few Ohio repair owners are using SBA to buy their building. Franchise brands appear in 4.2% of loans, so the typical borrower is an independent shop.

Cancellation and charge-off floors in Ohio

After approval, 12.9% of the FY2017 to FY2024 loans were cancelled, a floor that rises to 13.9% if undisbursed loans are counted. Of the 195 loans disbursed from FY2017 to FY2021, 3.1% have been charged off to date and 1.0% within five years of approval. The true rates can only be higher than these floors. The weak year was FY2020, with 27 loans and $4.1 million, against 72 loans in FY2022; by FY2026 the count was 31 loans and $9.6 million.

Testing an Ohio repair shop before the loan

Because so many Ohio deals are small, the feasibility work has to be sized to the request without skipping the questions that matter. Demand should be tested against the competing shops and dealer service departments in the trade area, and the busiest lending counties, Franklin with 50 loans, Cuyahoga with 40, Summit with 25 and Lake with 23, are also the most crowded. Cost means equipment quotes and the lease terms, since few of these borrowers own the real estate. Debt service coverage should be run on billed technician hours, parts margin and the owner's draw, not gross sales. If the loan buys a building, value has to come from sales of comparable repair properties. One note on the data: truck repair shares a code with car repair and cannot be pulled out, and shops that do only collision work, windshields or quick oil changes belong to separate classes and are not in these figures.