Are you thinking about starting a car dealership in Australia? Starting any type of dealership in Australia requires significant investment. From acquiring vehicle to sell, to location rent and staff expenses, the costs add up.
EasyCars has put together the complete guide on how to get financing to start your car dealership startup in Australia.
Let’s get into it!
Assess Your Financing Needs
Before you think about looking for financing to start a car dealership, it is important that you clearly understand the amount of finance that you will need. Put together a detailed car dealership business plan that outlines all your startup costs, including:
- Inventory Costs: How much money will you need to purchase cars to sell?
- Facility Costs: How much will it cost to find and rent a location for your car dealership?
- Operating Costs: How much do you expect to spend on day-to-day operational expenses including salaries, utilities, insurance and car dealership marketing.
- Licensing and Permits: To operate a car dealership in Australia you will need to have the correct licences. You will need to factor in fees for gaining the necessary licences.
Explore Different Financing Options
There are several different financing options available to aspiring car dealers in Australia. Each financing option in Australia has their own advantages, disadvantages and requirements. Here are some of the most common financing options that many new and used car dealers in Australia use:
Bank Loans
The most popular financing option for car dealers in Australia is traditional bank loans. Traditional bank loans typically offer competitive interest rates and flexible terms. To get approved for a business loan in Australia, you will need:
- A Strong Business Plan: You will need to have clear and concise projections on your dealerships financial performance and profitability.
- Good Credit Score: Like all loans, you will need to have a good credit score to be approved for a business loan in Australia.
- Collateral: Many banks will require assets that can be used as security. This could include real estate or other valuable property.
Business Line of Credit
The second and another commonly used form of financing in Australia is a business line of credit. A business line of credit is a financing option that allows your dealership to borrow up to a certain limit as needed. This can be particularly useful for managing cash flow and covering unexpected expenses. Key benefits of business line of credit in Australia include:
- Flexibility: You can access funds that are needed and only pay interest on the amount borrowed.
- Revolving Credit: Another strong benefit is that you can reuse the line of credit even after paying the entire balance.
Equipment Financing
If you need to purchase equipment for your dealership, such as lifts, diagnostic machines, or office technology, consider equipment financing. This type of loan is specifically designed to cover the cost of equipment, with the equipment itself serving as collateral.
- Preserve Cash Flow: Spread out the cost of equipment over time.
- Fixed Interest Rates: Easier to budget and manage.
Floor Plan Financing
An industry specific financing option that almost all used car dealerships in Australia take advantage of is Floor Plan financing. Floor plan financing is specifically designed for car dealerships to finance the vehicles that they are looking to sell. Floor plan financing allows dealers to finance the cost of vehicles until they are sold. Key benefits of floor plan financing include:
- Low Interest Rates: Floor Plan financing often comes with low interest rates as the risk for lenders is lower.
- Inventory Control: Finance only the vehicles you need, improving your dealerships cash flow management.
Investors and Venture Capital
Another financing option available for dealership in Australia is investors and venture capital. This option is where you sell a stake in your dealership in exchange for operating capital. This option is best for car dealership startups with high growth potential and a solid business plan.
- Large Capital Injections: Investors can provide significant funds to supercharge growth.
- Expertise and Networking: Many investors bring contacts that can be used to further fuel growth.
Government Grants and Subsidies
One of the biggest advantages of starting a business in Australia is there are some government grants and subsidies available. Explore the different government grants and subsidies available to small businesses. Some of these grants can over specific expenses like staff training, technology, and research.
- Non-Repayable: Australian Government Grants do not need to be repaid.
- Specific Use: Australian Government Grants are often targeted for specific purposes and industries.
Prepare Your Loan Application
Once your dealership has decided on the best financing option for your unique needs, you will need to prepare for your financing application. Here are some of the common things that you will need to improve your chances of approval:
- Business Plan: A detailed car dealership business plan that outlines your business model, market analysis, financial projections and overall operating strategy.
- Financial Statements: Your Personal and business financial statements, including income statements, balance sheets, and cash flow statements.
- Credit Reports: Personal and business credit reports to demonstrate your creditworthiness.
- Collateral: Documentation of any assets you’re using to secure the loan.
- Legal Documents: Car Dealership licenses, permits, and other legal documents.
Improve Your Chances of Approval
To increase your chances of securing financing for your car dealership consider doing the following steps:
- Build a Strong Credit History: Maintain a good credit score by paying your bills on time.
- Increase Your Collateral: Try to build and offer assets as collateral to reduce the lender’s risk.
- Strengthen Your Business Plan: Make sure that your business plan is clear and detailed. The better your plan is the more likely you will be to receive approval.
- Network and Build Relationships: Build relationships with potential lenders and investors.
Final Word,
Securing financing is a key part of starting any business. One of the biggest advantages of starting and operating a car dealership in Australia is there is a multitude of different lending options available. The options presented in this piece are a few financing examples that you can take advantage of to start a car dealership in Australia.
DISCLAIMER – The content within this blog does not constitute professional advice and is intended to be general in nature. Please consult with all relevant parties prior to making any decision.
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About EasyCars,
EasyCars by Jeal is an Australian, web-based, dealer management system that automates the buying and selling of motor vehicles. Using the latest technologies, EasyCars removes frustrations experienced at the dealership and opens your doors for greater growth.
EasyCars features include Simple Stock Management, Automated Advertising, Integrated Accounting, Government Compliance, Business Reporting, Facebook Automotive Inventory Ads, Reviews Management, Dealership Websites and more.
To learn more about EasyCars Dealer Management System or to arrange a no-obligation free demo, contact us today on 1300 473 744 or submit the form below.