If you’re thinking about taking out a loan for your auto repair shop, there’s something you need to know: banks don’t just look at your numbers—they look at your story.
In episode #161 of Business by the Numbers, Hunt Demarest, CPA, breaks down how to build financial projections that banks will actually approve and the common mistakes that get shop owners denied.
Rather than just numbers on a spreadsheet, banks want to know:
- Where are you now?
- Where are you going?
- How will you get there?
Most loan applications fail because the shop owner assumes their accountant can “just do the projections” for them. But financial projections are not just an accounting task—they’re a business strategy.
Here’s a breakdown of the key takeaways, so you don’t have to listen to the episode to get the insights.
One of the biggest mistakes shop owners make is assuming that if they need to show higher revenue to qualify for a loan, they can just “adjust” the numbers to look better. Banks see right through that. A projection needs to be backed by real changes in your business.
Why Banks Reject Most Financial Projections—and How to Avoid Their Biggest Red Flags
Banks aren’t just looking at whether the numbers work on paper—they want to see a realistic, well-thought-out plan behind them. If you project massive revenue growth without any explanation of how you’ll achieve it, your loan is likely to be denied.
One of the biggest mistakes shop owners make is assuming that if they need to show higher revenue to qualify for a loan, they can just “adjust” the numbers to look better. Banks see right through that. A projection needs to be backed by real changes in your business.
The Three Key Levers You Can Adjust in Financial Projections
- Sales: Banks will ask, “How are you getting more cars in the shop?” If your revenue projection jumps by 30 percent, you need a clear strategy—more marketing, higher pricing, or expanded services.
- Margins: Are you improving efficiency? Increasing prices? Lowering costs? If your gross profit margin changes significantly, banks want to know why. If you plan to charge more per job, how will you ensure customers are willing to pay?
- Expenses: Banks expect overhead to increase as sales grow—whether it’s additional technicians, higher marketing spend, or expanded facility costs. If your expenses remain flat while sales double, your projections will raise red flags.
How to Create a Projection That’s Realistic—Not Just Optimistic
Your financial story should match reality. If you’ve lost money for the last three years, projecting a sudden 50 percent profit increase without significant changes in operations won’t fly. Instead, explain what you’ve already done to increase profitability—price adjustments, cost reductions, or operational improvements.
Banks are also skeptical of overly aggressive growth assumptions. If your business has historically grown five percent per year, suddenly projecting 50 percent growth without a clear, detailed plan will be a red flag.
Banks are also skeptical of overly aggressive growth assumptions. If your business has historically grown five percent per year, suddenly projecting 50 percent growth without a clear, detailed plan will be a red flag.
Why Your Accountant Can’t Do Projections Alone (and What You Need to Do)
Your accountant can crunch the numbers, but only you know the real plan for your shop. Projections are a collaboration:
- You provide the vision: “We plan to increase revenue by adding two more bays and hiring another tech.”
- Your accountant translates that into financials.
If you expect your accountant to “just do the projections,” you’re missing a critical piece of the puzzle. The financials must be built around a real strategy for growth.
The One Mistake That Could Cost You Your Loan
Many shop owners reverse-engineer their projections. Instead of building a realistic business plan, they start with the number they need to qualify for a loan and work backward to justify it.
This approach creates a serious problem—if the numbers don’t add up, the bank will reject the loan, and you may not get another chance to revise your projections.
A strong financial projection should be based on facts, not just what you think the bank wants to see. It should be supported by historical data, realistic growth plans, and a clear explanation of how you will achieve your targets.
If you’re planning to apply for financing, now is the time to make sure your projections are rock solid. A well-structured financial story can be the difference between getting the loan and being denied.
Listen to the full episode here: www.paarmelis.com/business-by-the-numbers
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