Gas stations are lucrative businesses, especially if they have all or a combination of a convenience store, quick serve restaurant (QSR), automated car wash and/or automotive services. As an evergreen business that has proven itself pandemic-proof, lending options are readily available particularly for those business that are consistently profitable, complaint with regulatory and environmental requirements and where the buyer/borrower is creditworthy.
Securing financing for any type of business loan is an involved process. It is highly beneficial for the business buyer/borrower to understand what to expect before starting the process. Anticipating what is expected and the process involved in getting a gas station SBA loans increases the chances of successfully securing the financing needed to purchase the desired business.
This is why working with experienced and knowledgeable business loan brokers, who can guide you through the entire gas station SBA loans process, prevent needless delays and troubleshoot issues. This type of valuable information, experience and insight may potentially save you thousands in your business acquisition. Getting prequalified and vetted by a business loan broker for gas station financing before you are ready to buy a business is essential to a successful outcome.
An SBA loan can take up to 90 days or more to effectuate because they are a government backed program with related underwriting requirements that requires extensive documentation and specific procedures that the lender must complete to comply with the SBA loan guarantee requirements. The borrower’s credit, application, resume, business plan and past industry experience will be considered in the SBA decision process for the loan.
Though the process is not fast and may take a while and the borrower will have to jump a few hurdles, loan financing usually provides the best rates and repayment terms which makes it worth the wait and the effort.
Gas stations that have stable, consistent profits from multiple services, such as a convenience store, automated car was, QSR and auto services along with commercial real estate tend to be easy to finance. For an SBA loan, lenders look to business performance, the borrower’s experience and credit worthiness.
The SBA offers several small business financing programs for gas stations. The 2 main small business loans programs that Mission Peak Brokers facilitate are the SBA 7a loan and the SBA 504 loan.
The SBA 7a loan program is primarily used for business acquisitions, working capital, or capital expenditures such as for furniture, fixtures, equipment and leasehold improvements. The SBA 504 loan program, on the other hand, is used where the gas station includes commercial real estate for owner-occupied properties.
SBA 7a loans require 20% down payment and can be amortized over 10 years. 504 loans require only a 10% down payment and can be amortized over 30 years.
In terms of collateral, SBA 7 a business loans may require the borrower to post outside collateral such as unrelated real estate to the gas station acquisition. For a 504 loan, no outside collateral is necessary.
Find the best option for you
Loan Proceeds May Be Used For:
Loan Proceeds May Be Used For:
Should you be interested in buying a gas station, it is highly advisable that you hire a business loan broker to help you filter through the relevant financing options available. The following are various funding options to acquire a gas station business, gas station commercial real estate or gas station construction loan.
The SBA is a US government administrative department that offers commercial funding. The SBA is not a lender. While the government does not provide commercial liquor store funding, the SBA offers its network of approved lenders a guarantee of repayment in the case of the borrower’s default. The SBA offers the most favorable rates and terms for commercial financing. The SBA guarantees up to 85% of a loan, permitting lenders to offer higher loan amounts on more favorable terms to the borrower.
Retirement Funds: A qualified retirement account, such as an IRA or a 401(k), can be rolled into a convenience store business acquisition investment. Technically, since it’s already the borrower’s money it’s not like a traditional loan. Yet, it is borrowing from one’s retirement account. Borrowing against retirement allows entrepreneurs to use their business as a tax-deferred investment as opposed to investing in the stock market or real estate. The process usually runs rather quickly and funds can be secured within 30 days for liquor store financing.
Seller Financing For those liquor stores with inadequate books and records, they may very be shut out of traditional and SBA loans. A borrower’s less than stellar credit history may also pose as a hindrance to third-party lending. Where this is the case, a very common alternative to traditional liquor store loans is seller financing. In lieu of receiving the full purchase amount, a liquor store seller might be willing to finance all or part of the acquisition price. The transaction is collateralized by the convenience store business. Usually the seller will want a 25-40% down-payment.
For borrowers already in business, another option is to get a business line of credit and use those proceeds to purchase a liquor store. These credit lines are usually unsecured and can be used for general business expenses.
For liquor store buyers who have equity in residential properties, a HELOC might be an excellent option for borrowing against that realty to finance the liquor store acquisition.
For liquor store buyers with exceptional credit, an unsecured business loan may be obtained based solely on the borrower’s creditworthiness. Usually the borrower has substantial cash assets. Unsecured business loans do not require the borrower to pledge collateral like inventory, equipment, or real estate.
Hard money loans are another option for financing a liquor store purchase. While not on the top of the list, this type of loan might be used as a bridge loan to a future SBA loans that may not be available now for the borrower. These types of loans usually involve very high interest rates for short terms. If a borrower has poor credit or the liquor store seller did not maintain good books and records, getting a hard money loan for a few years while the borrower successfully operates the business and maintains good records, could permit securing SBA financing for the liquor store at a later date.
Investors/Partners: Though not a loan, a borrower with good connections and experience might be able to solicit capital investment or partnership in order to lower the amount that they need produce to acquire the business. By spreading the risk and sharing the rewards, the liquor store buyers can facilitate the business acquisition with or without financing.
Once SBA loan underwriting is underway for the purchase of an existing gas station, the borrower also needs so submit all appropriate inspection and registration documents for the business especially regarding the underground storage tanks. Additionally, the borrower will need to produce to the lender these common documents:
The lender will order a third party market appraisal to determine comparable sale prices for similar businesses to justify the sales amount of the contract for sale. If commercial real estate is involved in the deal, then the lender will also order a market valuation of the real estate in addition to the small business to ascertain the total amount of value involved in the transaction.
Gas stations often need capital expenditures which necessitate infusions of capital. Gas station business owners can secure working capital in the form of gas station loans, lines of credit, gas station financing, and other forms of commercial lending to keep their business running smoothly.
The SBA 7a loan is used by many gas station owners for working capital loans. The gas station owner may use the loan proceeds to purchase new equipment, inventory, expand service offerings, secure “branding” to optimize marketing, etc.