Buying A Gas Statio? Tips For Getting Gas Station Loan | American ...

Financing service stations are difficult, complex and subsequently most conventional finance companies and banks don?t consider financing a gas station or convenience store properties. Why?

1. Gas stations, convenience store and carwash business is a ?cash business? and no company owner would declare the cash in the tax returns. As a result, it is impossible to verify cash flow and figure out the debt to service ratio for the loan
2. Service station properties have environmental risks. Those that are clean have a higher risk of environmental problems later on
3. In the event the lenders take over the gas station properties through foreclosure, they are not capable to run the business. Unlike income producing properties such as apartments, the lenders can?t find a property manager to deal with the service station.
4. There are additional issues such as low fuel profit margins, restrict dealer or franchise contract which makes the lender uncomfortable in considering gas station financing

There are few lenders that will consider gas station loan and they mostly use SBA loans to finance the property because federal government guarantees major portion of the loan. Despite having the government guarantee, the lenders are very conservative in underwriting the transaction. To be honest with you, for those who have found a gas station property to buy, financing can be done but would be a pain so be ready.

You will find niche lenders concentrating on gas station financing and convenience store loan. Some would go as high as 80% loan to value of the property and they use the real estate, business and equipments as collateral in underwriting the project. Underwriter looks at the taxes, income statements and sponsors? credit and experience to assess the credit worthiness of the transaction.

Once the borrower has got the credit approval, the lender moves forward with the due diligence including appraisal, environmental reports, feasibility studies, title search and so forth. After lender is content with the due diligence and all the outstanding issues are resolved, loan documents will be drawn and subsequently loan will be funded. Now, keep in mind that borrowers pay for the lenders underwriting costs and due diligence fees. These fees may be as high as $10K or higher and often non-refundable. Lenders usually charge some fees that may be as high at 3% or more of the amount of the loan and the rates are higher risk the bank takes. So it?s important to evaluate all these fees and expenses to be sure it?s wise for you to purchase a gas station property.

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Tags: convenience store loan, Gas Station Financing, Gas Station Loan, Service station loan

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