By Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.
Gas station loans are one of the harder transactions to complete for a couple of reasons. Limited pool of interested lenders, environmental issues and the single use nature of the properties. In addition, due to the cash nature of the business, many borrowers simply do not show all income and struggle with documenting necessary cash flow via their tax returns to qualify.
SBA Loan Options For Gas Stations
One of the best ways to finance a gas station is through the SBA. Benefits of the SBA programs for gas station loans are numerous, which include the highest level of financing in the business and reliability of funding. 90% loan to value is common with the SBA versus 70% or so with other sources.
Borrowers can expect 25 year amortization schedules with rates at approximately 2.25 – 2.75% above the Prime Rate. Loan amounts up to $5,000,000. Besides the terms, it is important to understand that SBA loans continue to close, while most other sources of financing for gas stations have remain unreliable.
SBA lenders can have more flexibility with past personal credit issues. Some SBA lenders, when they have a full understanding of the borrowers credit issues, will go down to 580 or so. Past short sales, foreclosures and even bankruptcies are potentially OK.
The SBA programs offer the longest term and repayment schedules in the business at 25 years. In comparison, most traditional bank loans will be on a 20 year amortization schedule, with a balloon clause at year 5 or 10, on this building type. The shorter the amortization schedule the higher the monthly payment on the loan for the borrower. In addition, having a balloon/shorter term, means the borrower will have to refinance the loan before its paid off and re incur all of the closing costs.
Also, you can finance virtually any business related use with this loan, such as working capital, partnership buy outs, renovations, construction, equipment, inventory, real estate, etc.
Most traditional banks will decline a loan for declining gross sales, low cash flow, low collateral, or experience many SBA lenders will still be able to get comfortable will the loan request and approve it having more flexibility with underwriting.
Gas Station Financing
Specialty portfolio lenders can have much more creativity with structure, terms and what they believe is a fund-able loan request. Most of these sources are not traditional banks and therefore can lend on what they want to. But most of these lenders are much more expensive in terms of rate and fees and will not go as high as far as leverage, than with the SBA. And, many of these specialty lenders have gone out of business from the recession.
Conventional financing (bank loans) maybe your worst options as they will have the most conservative options. Leverage is normally capped at 65 – 70% loan to value and will want to see very strong cash flow, as reported on your tax returns to qualify.
Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.