SBA auto repair loans by the numbers
From FY2015 through June 30, 2026, the SBA approved 14,730 auto repair loans under 7(a) and 2,616 under 504, net of cancellations.[1] Most are small loans to independent shops: 90.2% carry no franchise code.
SBA auto repair loans (NAICS 8111, excluding car washes and glass)
| Measure | Figure |
|---|---|
| Median 7(a) loan, FY2015 to June 2026 | $158,100 |
| Middle half of 7(a) loans | $50,000 to $521,000 |
| Buying an existing shop (FY2019 on) | 15.4% of 7(a) loans, median $580,000 |
| Shop purchases with terms of 25 years or more | 21.6% |
| Share of all auto repair loans made through 504 | 15.1% |
| Charged off, 7(a) loans approved FY2010 to FY2016 | 6.1% (all industries: 7.0%) |
| Same cohorts: shops under 1 year old / 5 years or older | 10.2% / 4.2% |
Source: SBA 7(a) and 504 FOIA loan data as of June 30, 2026. Includes general, specialized, body, oil change and other repair shops. Charge-off rates count loans, not dollars.
Most shop purchases run on 10-year terms, which points to deals made of goodwill and equipment, with the building leased or bought separately. The 504 program is where shop real estate tends to go.
Three ways into a shop
- Buying a shop as a first-time owner is an Initial Acquisition. At least 10% down that can't be waived, and the seller's history must show 1.25 coverage.[2]
- Buying the shop you work in after 24 months or more, from a single owner selling 100%, is an Owner Buyout. Same 1.25 floor, different equity rules.
- Adding a location as an existing owner can run through 504 for a new building, or through 7(a) if you buy another shop.
Equipment is most of what you buy, and it counts at a discount
A repair shop's value sits in its lifts, alignment rack, scan tools, parts and customers. For the SBA's fully secured test, the lender discounts each one.
How a lender counts shop collateral
| Asset | Counted at no more than |
|---|---|
| Used lifts, alignment rack, scan tools | 50% of net book value, or 80% with an orderly liquidation appraisal |
| New equipment | 75% of price |
| Building and land (improved real estate) | 85% of appraised value |
| Parts inventory and receivables | 10% of book value (a lien is required in a purchase) |
| Goodwill and customer list | Nothing |
Values are net of any prior liens. When the discounted values fall short of the loan, the lender must take available equity in personal real estate you own alone, unless the equity is under 25% of its value.
For detailed calculations and real examples, see the FUNDED Auto Repair Guide.
In the book's main example, Kevin Brooks, a dealership service manager for 12 years, buys an independent six-bay shop with its building. The building and land appraise at $900,000, which counts as $765,000 at 85%, against a $1,575,000 loan. His used equipment and parts can't close that gap after the discounts, so the lender must take available equity in his personal real estate, depending on how he owns it and how much equity it holds. A shortfall alone is not a reason to decline the loan.
Two choices can move the number. Used equipment can count at up to 80% of its orderly liquidation value instead of 50% of book value, if you pay for that appraisal. And how the lender classifies bolted-down lifts, as building or as equipment, changes both the collateral and the term. The SOP doesn't settle the lift question, so your lender decides and records it. Kevin's deal treats his surface two-post lifts as equipment.
One more rule ties collateral to people. On a Standard 7(a) loan that isn't fully secured, the SBA requires life insurance in the amount of the shortfall for the owner of a business that depends on one person's active participation. A small shop run by its owner often fits that description.
The building and the business are valued separately
When a shop sells with its building, the lender subtracts the appraised real estate from the price. Equipment stays in. What is left is the Business Purchase Price, and an independent business valuation has to support it.
Kevin pays $1,650,000: $900,000 for the building and land, and $750,000 for the business (lifts, alignment, scan tools, parts inventory and goodwill). The lender's independent valuation comes in at $780,000. On one 7(a) loan, the building share can run up to 25 years and everything else is limited to 10, so his loan comes to an 18-year blended term.
Environmental review on a repair site
Auto repair is on the SBA's list of environmentally sensitive industries. When the building or a leasehold mortgage secures the loan, the review must begin with a Phase I at any loan size, and a past repair use on the site counts as a match. A shop that is one unit in a non-industrial building of four or more units may follow a lighter path.
The SOP sets no rule of its own for lifts, waste oil, hydraulic fluid, parts washers or paint booths. What binds is the environmental professional's report: the SBA requires compliance with all of its recommendations, including housekeeping measures such as secondary containment and sealing floor drains. Kevin saw stained concrete in two bays and drums of used oil by the back door, so his Phase I by an independent professional is likely to look at both.
Federal rules apply whether or not there is an SBA loan. Used oil must be kept in labeled, leak-free containers and shipped through transporters with EPA identification numbers (small self-hauls aside), and used oil stored underground falls under the federal tank rules. Hydraulic lift tanks are excluded from those tank rules.[3] A shop on a former gas station site starts with a Phase I as well, and the professional will look for old tanks and lines.
No real estate, no SOP review. A buyer of a shop in leased space who pledges only equipment, inventory and receivables is outside the SOP's environmental requirement, though the lender may ask for a review under its own policy.
Buying the shop you work in
Eddie Ruiz has been the lead technician in the same four-bay shop for 8 years. When the single owner retires, he offers Eddie 100% of the stock for $600,000. Because Eddie has worked there for more than 24 months, the SBA treats it as an Owner Buyout, and the business and Eddie are co-borrowers.
Owner Buyout vs Initial Acquisition
| Rule | Owner Buyout (Eddie) | Initial Acquisition (Kevin) |
|---|---|---|
| Equity measured on | Purchase price | Total project cost |
| Can the lender reduce or waive the 10%? | Yes, if the business has enough liquidity | No |
| Coverage floor | 1.25 | 1.25 |
| Quality of Earnings report | Not required | Required at a Business Purchase Price of $3,000,000 or more |
| Seller staying on | Not covered by the 24-month consulting cap; whether the seller must stay and guarantee is your lender's call | May not stay as an owner or employee; consultant up to 24 months |
The structure decides the category. If a new company buys the shop's assets instead of its stock, the deal is usually underwritten as an Initial Acquisition.
For detailed calculations and real examples, see the FUNDED Auto Repair Guide.
Eddie's equity is $60,000, 10% of the price: $35,000 of savings and a $25,000 seller note on full standby. His lender could have reduced it and chose not to. Plan for the full 10% and treat any reduction as a bonus. His $540,000 loan runs 10 years, and the shop's documented cash flow of $132,000, after a market salary for running it, covers the $76,919 of annual debt service 1.72 times.
Two open items deserve an early meeting with your lender: whether it will want the retiring owner to guarantee the loan, and whether you buy the stock or a new company buys the assets, since that choice decides the category. Ask an attorney and a tax advisor which structure fits before the purchase agreement is drafted.
Technicians are the production line
A bay earns money only when a qualified technician is working in it. If key people leave after closing, revenue can leave with them. The SBA requires the lender's credit memo to describe the management team and how daily operations will be run, and many lenders ask how long the key technicians have been there, what certifications they hold, and whether the seller is the shop's best diagnostician.
Pay is part of that risk. The national median for automotive technicians was $48,370 in repair shops and $59,920 at car dealers in May 2025, so a seller's payroll may be below what it costs to keep or replace a good technician.[4] Build a market wage into your own numbers, meet the key technicians and the service writer before closing if the seller agrees, and put the seller's transition role in writing.
Down payment and seller notes on a purchase
For a first-time buyer, the SBA minimum is 10% of total project cost, and it can't be reduced or waived. A seller note counts toward it only on full standby, meaning no principal or interest for the life of the SBA loan, and limited sources like that can cover no more than half of the required injection. A temporary exception for veterans: from November 11, 2026 through September 30, 2027, the SBA has announced that an eligible veteran purchasing an existing business with a 7(a) loan may raise the full 10% from these sources (SBA News Release 26-117); ask your lender how it applies.
Kevin needed $175,000. He put in $115,000 of cash, and the seller carried $60,000 on full standby, under the half cap of $87,500. The standby note also gives the seller a reason to want a smooth handoff, because it pays nothing until the SBA loan is repaid.
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Kevin's deal, start to finish
Every number below comes from the book's worked example. The interest rate is illustrative.
Buying a six-bay shop with its building through SBA 7(a)
| Item | Kevin's deal |
|---|---|
| Receipts on last tax return | $1,900,000 |
| Purchase price | $1,650,000 |
| Building appraisal / Business Purchase Price | $900,000 / $750,000 |
| Independent business valuation | $780,000 |
| Working capital and closing costs | $100,000 |
| Total project cost | $1,750,000 |
| Equity injection (10%) | $175,000: $115,000 cash + $60,000 seller note on full standby |
| SBA 7(a) loan | $1,575,000, 18-year blended term |
| Annual debt service at an illustrative 7.50% | $159,700 |
| Documented cash flow, after a market salary for a shop manager | $245,000 |
| Debt service coverage | 1.53 (floor 1.25) |
| Global (household) coverage | 1.38 (floor 1:1) |
| Upfront guaranty fee, FY2027 | $41,796.88 on the $1,181,250 guaranteed portion |
The shop clears 1.25 with room. Kevin's $750,000 Business Purchase Price is well under the $3,000,000 line where a Quality of Earnings report would be required.
For detailed calculations and real examples, see the FUNDED Auto Repair Guide.
Building a second shop through SBA 504
Priya Shah has owned her shop for 9 years and is building a second six-bay location with service pits and in-ground lifts, for $2,000,000. Because she is an existing business with the same ownership, the SBA treats the new shop as an expansion, not a new business.
The pits and in-ground lifts are what matter for her contribution. The SBA's 504 list names service centers with pits and in-ground lifts as special purpose property, and the CDC concludes her building qualifies. That raises her contribution from 10% to 15%, an extra $100,000. A shop with surface lifts and no pits is not on the list, and the CDC makes the call for each building.
Priya's second shop
| Item | Amount |
|---|---|
| Land | $450,000 |
| Building and site work | $1,150,000 |
| Lifts, service pits and equipment | $300,000 |
| Soft costs | $100,000 |
| Total project cost | $2,000,000 |
| Priya's contribution (15%, special purpose) | $300,000 (it would be $200,000 at 10%) |
| Bank first lien (50%) | $1,000,000 |
| CDC debenture (35%) | $700,000 |
| New annual debt service, illustrative rates | $140,226 |
| Combined coverage, year 1 / year 2 | 1.67 / 2.25 (504 floor 1.15) |
| 504 upfront guaranty fee, FY2027 | $3,500 (0.50% of the debenture) |
On the 504 jobs standard of one job per $95,000 of debenture, Priya's debenture needs 8 jobs, and she plans 9.
For detailed calculations and real examples, see the FUNDED Auto Repair Guide.
Her first shop's $270,000 of cash flow carries the new site while it ramps up. Ask your CDC early how it will classify your building, because the pit and lift design decides your contribution before the first shovel goes in.
SBA 7(a) or 504 for an auto repair shop
Which program fits which shop deal
| Your deal | Usual program | Minimum you put in |
|---|---|---|
| Buying a shop as a first-time owner | SBA 7(a) | 10% of total project cost, can't be waived |
| Buying the shop you work in (Owner Buyout) | SBA 7(a) | 10% of the price (your lender may reduce it) |
| Buying another shop as an existing owner | SBA 7(a) | 10%; your lender may reduce it if you buy 100% of the ownership |
| Building or buying a shop building, existing business | SBA 504 | 10%, or 15% if the CDC finds it special purpose |
| Building a shop as a new business | SBA 504 | 15%, or 20% if special purpose |
The standard 7(a) maximum is $5,000,000. For an existing owner buying 100% of another shop, the coverage floor is 1.15 instead of 1.25.
For detailed calculations and real examples, see the FUNDED Auto Repair Guide.
If you lease the shop, read the lease early. When leasehold improvements, or equipment attached to the leased building, reach $500,000 or 30% of the loan or the collateral (whichever is less), the lease term, counting only renewal options you alone can exercise, should equal or exceed the loan term. Eddie's lease and options run 15 years against a 10-year loan.
How to finance an auto repair shop with an SBA loan
- 1
Pick your category
A first-time purchase is an Initial Acquisition at 10% of total project cost. Two years in the shop and a 100% stock purchase from a single owner can make it an Owner Buyout, with equity on the price.
- 2
List every piece of equipment
Record age, condition, service and lift inspection records, and which tools and software licenses transfer. Used equipment counts at 50% of book value unless you pay for an orderly liquidation appraisal.
- 3
Separate the building from the business
Subtract the appraised real estate from the price. The independent valuation has to support what is left, including the equipment.
- 4
Ask about your home early
Shop collateral rarely covers the loan after the discounts, so the lender must take available equity in personal real estate you own alone, unless the equity is under 25% of its value. Ask whether life insurance will also be required.
- 5
Order the Phase I if the building is pledged
Expect the professional to look at bays, floor drains, used oil storage and any old tanks, and follow every recommendation in the report.
- 6
Meet the technicians
Ask how long the key people have been there, what certifications they hold, and whether the seller does the hardest work. Price their pay at a market wage.
- 7
Run coverage twice
Divide documented cash flow by annual debt service for the business test, then run the household global test at 1:1 or better.