How to Finance a Tire Shop Acquisition

From SBA 7(a) loans to seller carry notes, understand the capital stack options that get independent tire shop deals done in the $1M–$5M range.

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Acquiring an independent tire shop is highly financeable given stable, non-discretionary demand and strong SBA eligibility. Most deals combine an SBA 7(a) loan with seller financing and buyer equity, keeping cash requirements low while funding inventory, equipment, and goodwill in a single structured transaction.

Financing Options for Tire Shop Acquisitions

SBA 7(a) Loan

$500,000–$4MPrime + 2.75%–3.5% (variable); currently 11–12.5%

The most common financing tool for tire shop acquisitions. Covers 80–90% of the purchase price including inventory and goodwill, with repayment terms up to 10 years for business assets.

Pros

Low buyer equity injection of 10–15% including seller note
Covers inventory, equipment, and goodwill in a single loan
Lenders familiar with tire shop cash flows and EBITDA margins

Cons

×Personal guarantee required from buyer and any 20%+ equity holders
×Underwriting requires 3 years of clean tax returns with verifiable revenue
×Cash-heavy operations with undocumented sales will trigger lender scrutiny

Seller Financing (Seller Carry Note)

$75,000–$500,0006–8% fixed, interest-only or amortizing over 3–5 years

Seller holds a subordinated note, typically 10–20% of purchase price, bridging buyer equity gaps and signaling seller confidence in business continuity post-transition.

Pros

Reduces buyer cash at close and satisfies SBA equity injection requirements
Aligns seller incentives with smooth customer and staff transitions
Flexible structuring including earnout provisions tied to revenue retention

Cons

×SBA requires seller note to be on full standby for 24 months in most cases
×Seller credit risk exposure if buyer defaults before note is repaid
×Negotiating note terms can complicate and delay deal closing timelines

Conventional Business Acquisition Loan

$250,000–$2M7–10% fixed or variable, 5–7 year terms

Community banks or credit unions may offer conventional financing for tire shops with strong financials, real estate collateral, or repeat borrower relationships, without SBA guarantee fees.

Pros

No SBA guarantee fee saves 2–3% upfront on loan origination costs
Faster closing timelines without SBA approval process requirements
Preferred for buyers with strong balance sheets or real property collateral

Cons

×Requires higher buyer equity injection, typically 20–30% of purchase price
×Less flexible on goodwill coverage without tangible asset collateral backing
×Harder to qualify without existing banking relationship or proven operating history

Sample Capital Stack

$1,500,000 (including $150,000 inventory at cost)

Purchase Price

~$14,200/month on SBA loan at 12% over 10 years; seller note interest-only at ~$563/month

Monthly Service

Estimated DSCR of 1.35x based on $230,000 EBITDA and ~$170,000 annual debt service

DSCR

SBA 7(a) loan: $1,275,000 (85%) | Seller carry note: $112,500 (7.5%) | Buyer equity: $112,500 (7.5%)

Model your own deal structure →

Lender Tips for Tire Shop Acquisitions

1Reconcile all tire sales revenue to bank deposits before approaching lenders — cash discrepancies are the single fastest way to kill SBA underwriting for tire shop deals.
2Ensure the facility lease has at least 5 years remaining including renewal options; SBA lenders require lease term to match or exceed the loan term.
3Separate inventory value from goodwill in your offer letter — lenders want inventory priced at cost with a clear audit trail, not bundled into a single purchase price.
4Demonstrate technician retention by providing employment records and compensation history; lenders view key-person dependency as a cash flow continuity risk during underwriting.

Frequently Asked Questions

Is a tire shop a good candidate for SBA financing?

Yes. Tire shops are SBA-eligible, asset-rich businesses with stable cash flows. Most single-location shops with clean financials and an experienced buyer qualify for SBA 7(a) loans covering goodwill, inventory, and equipment.

How much cash do I need to buy a tire shop?

With SBA financing and a seller carry note, buyers typically inject 7.5–15% of the purchase price at close — roughly $75,000–$225,000 on a $1.5M deal, depending on deal structure.

Will inventory be included in the SBA loan?

Yes, SBA 7(a) loans can cover inventory valued at cost. Lenders require a third-party or buyer-conducted audit to verify age, brand mix, and turnover before including inventory in the loan.

What DSCR do lenders require for a tire shop acquisition loan?

Most SBA lenders require a minimum DSCR of 1.25x, meaning the business generates $1.25 in cash flow for every $1.00 of debt service. Tire shops with 10–20% EBITDA margins typically qualify comfortably.

More Tire Shop Guides

Buy a Tire Shop Business →Valuation Guide →SBA Loan Guide →Deal Structure →Common Mistakes →SBA Calculator →Deal Structure Builder →

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