Loans For Gas Stations - Options

Gas station loans can be “tricky”. Environmental concerns, slim profit margins, credit card fees, fuel theft often causes many banks and lenders to shy away or better said, ignore gas station loan opportunities entirely.

In fact, many gas station owners seeking commercial mortgages will find it difficult just to find a local bank that will look at their deal. Here in Michigan, where we are located, most banks won’t consider financing regardless of how successful an operator might be.

Finding the right source that understands the gas station business and is not afraid of it is critical. And finding a source that is experienced in it is also critical in avoiding long delays and or dead deals after the lender learns enough about the business to, in the end, kill your loan request. You need a specialist. When trying to find the right gas station lender or bank they should be asking you some very specialized questions, here’s a few examples.

How many gallons of fuel do you currently sell annually? Most lenders are generally comfortable with volumes of 1 million gallons a year or more. They also have certain parameters for carwash and convenience-store sales. For instance, 32 cents in convenience-store sales for every one gallon of gas sold is usually considered a good number.
What kind of underground storage tanks are there on the property? How old are they? Are they double-walled? Many older sites have aging, single-walled tanks that should be replaced in the best interest of the owner and the lender.
Are you aware of any environmental issues? In fact, if they don’t ask any questions regarding the environmental status be very careful. Has a Phase I or Phase II environmental site assessment been performed lately?
What is your margin per gallon of fuel? Most lenders want to see a 7-cent-per-gallon margin for the deal to make sense. This is a net number calculated after deducting credit card transaction fees.
What are your convenience store's sales and margins? On a blended average, convenience-store margins should be in the upper 20-percent range. Cigarette margins are generally much lower than any other category. As such, the overall percentage sales of cigarettes will have a tremendous impact on the blended average.
What brand of fuel do you sell? Most lenders require a "brand", either national or regional.

Some specialty gas station and convenience store lenders will also take into account the business value in addition to the real estate value. The enterprise value is generally determined by looking at the cash flow of the convenience store combined with other profit centers such as carwashes and food services.

It's essential that your source for your gas station loans has a solid background in and understanding of the gas station loan industry and not just general commercial real estate loans.

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Commercial Finance Advisors, Inc.

261 E Maple Rd
Birmingham, Michigan 48009