Auto dealers are always thinking about the future. Every year seems to present a host of new challenges related demand, technology, inventory, or the general economy. But no matter the problem, the overarching conclusion is that dealers must be smarter with their money and get a lot better at what they do if they want to stay competitive. Key responsibilities like attracting and maintaining customers are much more difficult nowadays, requiring additional effort and resources. Industry experts have made numerous suggestions for adapting to today’s market. Typically omitted, however, is the need for a strong relationship with a business lender that has worked with myriad dealerships in various financial situations.
Such relationships are crucial for any business that must adhere to a tighter budget and cease sacrificing one element of the business to improve another. Here are a few reasons business loans for car dealerships will most likely become increasingly popular in the near future:
In the past, a car dealer’s inventory flow was almost entirely dictated by its OEM (Original Equipment Manufacturer). The dealership was not able to be strategic in terms of which vehicles they bought and/or when they bought them. Even though sales vary from season to season, a dealership would have the same amount of a certain vehicle for sale in the winter as it would in the summer. But this was before the availability of massive swaths of data containing vital information about your sales and customers. You can now find out what kind of vehicles are most popular for customers in your geographical area. By giving you more control over your purchases, the data ultimately increases profitability because profits for vehicles aren’t realized until they are sold.
The problem is that because of inevitable dips in cash flow, you don’t always have enough money at your disposal to do what your data says. It might make sense for you to buy larger quantities of certain vehicles towards the end of a lean period, as opposed to several months beforehand for a lower price. This happens to be an ideal function of a small business loan from a company like United Capital Source. While we might not be the only business lender capable of approving and distributing funding in under 48 hours, we can actually do this with multiple business funding programs. Our terms are negotiable as well, compared to other quick-minded business lenders that only offer one or two programs with stringent repayment structures.
A highly appropriate option for this specific case is a business line of credit. Unlike a standard business term loan, business lines of credit are geared towards short-term investments and the funds can be borrowed at different points in time. You could essentially use the business line of credit to purchase more vehicles than usual right before business picks up, and pay off the balance with the sales that take place shortly after.
Big data is also extremely useful for determining marketing budgets. Advertising is integral to a car dealership’s success, but only if you are advertising the right vehicles in the right place at the right time. When vehicles don’t sell, the first reaction tends to be simply slashing the price. But this doesn’t always offset the loss. Odds are, it’s not the price but the way the vehicle was marketed that is chiefly responsible for the lack of sales. This is why an increasing amount of small businesses are hiring private digital marketing agencies to ensure the biggest returns on their investments in Google ads, social media, or email marketing.
Since marketing campaigns are long-term investments, a more sensible business funding option for this scenario is a merchant cash advance. This type of working capital loan is especially advantageous if you accept credit card payments for on-the-lot financing from customers. You will likely be approved for a sizable advance which can then be paid back as you make sales, with slower months having no effect on your interest rate or the due date.
One unique challenge of car dealerships is its direct link to the general economy. When the economy suffers, you’d be hard pressed to find a dealership that doesn’t feel some level of impact. The never-ending risk of sudden economic turmoil likely prevents many dealerships from moving forward with expensive growth initiatives. Rather than using their revenue for such purposes, they put the money away just in case they should need it. Well, what if the money you were spending wasn’t coming directly out of your bank account? At UCS, we completely understand why a car dealership would want to borrow instead of digging into savings or operational funding. Your concerns about the economy shouldn’t stop you from capitalizing on your success or spending when you have earned the right to do so.
You may have heard that car sales have been on the decline since last year. This sudden halt in momentum could be a sign that dealerships need to improve their sales tactics or the various stages that make up the increasingly vital “customer experience.” Dramatic initiatives can be costly and might not produce results for some time. But with a company like United Capital Source in your corner, you can do what is necessary to grow your business without worrying if you are spending too much or too little. By the time you are ready for your second round of funding, you’ll know exactly how to budget and execute a much larger investment with much larger rewards.
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