Working capital vs. line of credit for a tire shop: which one?
Same shop, same tire wall, two very different ways to pay for it. One is cheaper over a year; the other will actually fund this week. Here is how to tell which one you need.
The tire shop cash cycle, in one paragraph
A tire shop’s biggest expense arrives before its biggest season. You buy the winter wall in September and October, pay the distributor on terms that come due before the snow does, and sell the inventory through February. In between, techs are paid weekly and rent is due monthly whether the wall has moved or not. Then the cycle inverts: spring brings alignments, brakes and A/C, and the shelf you need is a different one. The money is not missing. It is sitting on the wall as inventory you already paid for.
The two products, side by side
| Working capital | Line of credit | |
|---|---|---|
| Amount | $10,000 – $2,000,000 | $25,000 – $500,000 |
| Shape | One lump sum, repaid over 3–18 months, done | Revolving; draw, repay over 6–24 months, draw again |
| Speed | Offer in ~4 business hours, funded in 24 hours | 1–3 days to open; same-day draws after |
| Minimum FICO | None | 600 |
| Time in business | 6 months | 12 months |
| Monthly deposits | $15,000 | $25,000 |
| Cost when not in use | n/a — the whole amount is out | Nothing. No maintenance fee, no cost on an undrawn line |
| Repayment | Fixed daily or weekly ACH | Fixed schedule per draw |
| Early payoff | Keep up to 30% of remaining cost at 30/60/90 days | Repay the draw; the line stays open |
| Underwritten by | Liftbay, in-house | Liftbay, in-house |
When the line wins
- The need is seasonal and predictable. The winter wall every fall. A draw in October, repaid out of winter sales, nothing owed until next year.
- You can open it before you need it. A line is underwritten on your statements at the time you open it. Open it in July, when the account looks its best, and leave it at zero until the distributor invoice lands. An unused line costs nothing.
- You want it to grow with you. Lines are reviewed every 6 months and grow with deposit history. A shop that opens at $50,000 and runs clean through a winter routinely comes up at review.
When working capital wins
- You need it this week. The tire machine died, the distributor wants the account current, the hiring window on a good tech closes Friday. Offer in about four business hours, funded in 24.
- You are between 6 and 12 months in business, or your score is under 600, or you deposit between $15,000 and $25,000 a month. The line’s criteria are higher; the advance’s are not.
- It is a one-off. A single big inventory buy for a new product line, a second alignment rack, a buildout. Take it, repay it, done — and if you pay it off inside the first 30, 60 or 90 days you keep up to 30% of the remaining cost.
What each one actually costs
A working capital advance is priced as a fixed total payback. A representative $150,000 advance over 12 months has a payback of $190,500 — a $40,500 cost of funding, $756 per business day or $3,664 a week. An illustration, not an offer. A line of credit is charged only on the drawn balance, for only as long as it is drawn; a $60,000 draw repaid in four months out of winter tire sales costs you four months of that draw, and nothing for the eight months the line sits unused. For a shop whose need is seasonal, that difference is the whole argument.
The sequence most tire shops end up on
Year one, under 12 months in business: a working capital advance for the fall build, paid down early in February when the wall clears. Year two, with 12 months of statements and a clean repayment history: a line opened in the summer, drawn in October, repaid by spring, and reviewed up in size every six months. If you also service a fleet on net-30, a factoring facility can run alongside either. Not sure which year you are in? Call and an underwriter will tell you in five minutes.
Related: Line of credit · Working capital · Tire & wheel shops
Questions that usually follow.
Can a tire shop have both a line of credit and a working capital advance?
A line and an advance are not usually run together at the same time, because both are sized on the same deposits. The common sequence is an advance now, then a line opened once the shop clears 12 months in business and a 600 FICO. A factoring facility on fleet invoices can run alongside either.
What does an unused line of credit cost a tire shop?
Nothing. Liftbay Capital charges only on the drawn balance, with no maintenance fee and no cost on an undrawn line. That is why the right time to open it is summer, when the statements are strong and nothing is drawn.
How fast can a tire shop get working capital?
About four business hours to an offer on a complete file and 24 hours to funding. A clean file signed before 11:00 AM ET generally funds the same day.
My tire shop has 8 months in business. Which one can I get?
Working capital. A line needs 12 months in business, 600+ FICO and $25,000 a month in deposits. Working capital needs 6 months, no minimum FICO and $15,000 a month.
Is the winter tire inventory a reason to use a line?
It is the classic reason. You buy the wall in the fall and sell it through February every year. A draw in October repaid out of winter sales, then nothing owed until next fall, is exactly what a revolving line is for.
Done reading? Get a real number.
Four minutes and three bank statements. Offer in about four business hours, funded in 24.