| Do you want to own a gas station? Gas stations | | | | offer some sort of training for their franchisees, |
| can be very profitable businesses to own (if you | | | | for most lenders this will count towards |
| don't believe me, just take a look at the current | | | | experience. What if you don't have any of those? |
| gas prices!), especially if they are branded. But | | | | You then might have to take on a partner that |
| what most potential owners don't realize is that | | | | does have the experience, so that you can get |
| financing for these types of properties can be | | | | financing. |
| very difficult. Before you consider buying a gas | | | | #3 The Borrower Has Poor Credit & No |
| station, you should have a good understanding of | | | | Cash |
| what it will take to get it financed, unless of | | | | Once again, since the default rate is high in this |
| course you have lots of money and you can pay | | | | industry, more lenders are paying closer attention |
| cash for it! | | | | to the borrower's current financial strength. The |
| So what are the 4 top reasons why financing for | | | | lenders want to make sure that the borrower has |
| gas stations will fall through? | | | | enough equity into the property as well as having |
| #1 Environmental concerns | | | | a credit score in the 600 range. If your credit |
| Rightfully so, most lenders don't want the liability | | | | score isn't at that range, you might have to |
| issues that can arise from current or previous | | | | consider a private lender or a hard money lender |
| owners. Often times, the costs to clean up a site | | | | instead of conventional or SBA loans. The |
| can be more than what the property is worth. | | | | downside to this option is that the terms are |
| Make sure you perform due diligence and ensure | | | | usually not that favorable. It should be used as a |
| that the property you are considering doesn't | | | | short-term solution. |
| have any contamination issues or improper | | | | #4 Can't Determine The Current Cash Flow Of |
| underground storage issues. This due diligence will | | | | The Business |
| include a Phase I and Phase II Site Assessments | | | | If a lender can't get an accurate picture of the |
| by a reputable environmental company. Lenders | | | | cash flow of the business, then they will reject |
| will only consider these reports if they are recent, | | | | the loan. Some sellers of gas stations don't always |
| so they are only valid for about six months. | | | | provide the potential buyer with all of the cash |
| #2 The Borrower Is Inexperienced | | | | flow of the business (many do not provide it due |
| Because the default rate can be so high in this | | | | to tax considerations). How do you get a better |
| industry, most lenders want their borrower's to | | | | look at the financials? Request copies of the past |
| have some experience in this industry. Experience | | | | 3 - 4 years of their fuel gallon total. This will give |
| can be in the form of managing gas station or | | | | you a better idea of their usage. |
| convenience stores. Also, most gas companies | | | | |