SBA 504 Auto Repair Shop Feasibility Study

The repair shop that owns its building

From FY2017 to FY2026 the 504 program approved 1,619 loans to automotive mechanical repair shops, $873.7 million in gross dollars. The median is the figure that marks this record out. At $408,000, the median 504 repair shop loan sits far above the repair shop median for both SBA programs combined, which small 7(a) shop loans pull down; it also differs from the 504 program's all-asset median. Half of all 504 shop loans fall between $247,500 and $662,000.

The outcomes are strong. Of the 698 repair shop loans that disbursed in FY2017 through FY2021, just 0.14% ended in charge-off, a figure that holds at 0.14% when only the first five years are counted. Cancellation is moderate: 12.1% of shop approvals made from FY2017 to FY2024 at the floor, 13.8% if every undisbursed approval is counted as cancelled. Franchise brands account for 6.5% of the loans. The Mortgage Capital Development Corporation holds 78 shop loans worth $65.5 million, Granite State Economic Development Corporation 75 worth $32.4 million, and Business Finance Capital 57; B:Side Capital and Mountain West Small Business Finance hold 54 apiece. California leads with 282 loans, ahead of Minnesota with 110, Florida with 90, Massachusetts with 89 and Illinois with 85. Approvals reached 209 and $121.5 million in FY2022, and FY2026 recorded 165 loans worth $118.2 million.

What a lender needs from a 504 shop study

For a borrower moving from a leased bay into an owned building, the feasibility question is whether the shop can carry the mortgage where it used to pay rent. A study has to show demand from the vehicles in the trade area and the competing independent and dealer service departments, and it should test the shop's own car count, average repair order and technician capacity, since the number of productive bays limits revenue. Cost covers the building, lifts, diagnostic equipment and any environmental work: waste oil, old tanks and floor drains can surface in a site assessment and stall a closing. Coverage on the shop's combined bank and CDC payments should survive a car count below its best year. The appraisal will treat the building as light industrial space and the study should support its income. On the class itself: SBA's code lumps truck service in with car repair; body shops, glass installers, quick-lube bays and the other-repair code fall outside this 504 class.