Jumpin' Jack Flash... it's a Gas
Gas Gas Station! There are tons of gas stations and convenience stores for sale but where can I get a gas station
So you're looking to buy a gas station, convenience store or truck stop and now you're looking
for a gas station loan. Better go buy yourself a bottle of aspirin. It's the same thing with
convenience store financing or truck stop financing. Make no bones about it, if you've found a gas
station or convenience store for sale, getting a gas station loan is a pain now. Financing these
types of properties and businesses has presented a challenge for years in the traditional commercial
financing arena. Banks generall have an aversion to financing them for numerous reasons, although your local
bank might very well have the best deal for you...(but that's also assuming they they will do
it...) Your best deal will almost always be your local bank because you'll have a depository
relationship with them (but NEWS FLASH...they're probably
not going to do your deal!)
Oh yeah, how about the price of fuel these days! Declining
gallonage... declining pool margins... better deal with someone that knows the industry!
Banks in general do not like to finance stations and convenience stores
for the following reasons.
Petroleum retail is a "cash" business and verifying cash flow is more difficult
than other commercial income producing properties such as apartment buildings and office
Petroleum retail has perceived environmental risks that are not present in many
other types of commercial properties. It is much easier to evaluate a loan where there is significantly
less perceived environmental risk.
Gas stations and convenience stores pose a larger problem for lenders if
properties are ever foreclosed on. In the case of many income producing properties, at a minimum the
lending institution can inspect the rent roll and continue collecting rents until a suitable buyer is
found. Banks do not step in and run gas stations and convenience stores in the case of
Let's not forget to add that gasoline fuel margins have been their lowest in
years due to ever increasing numbers of hypermarts and big box retailers who do not care about fuel
margins, but only to bring people in their door. Read the paper lately and looked at the price of a
barrel of oil too?
It's no wonder you get a quick NO from your local bank.
Truck stops and especially truck stops with video poker are
even worse...Better take out that high blood pressure medication to take with your
Many operators, dealers and small jobbers have been in the past funded by
SBA loans. Many banks LOVE to do Small Business Administration (SBA) loans because the federal covernment
guarantees 80% of the loan AND the banks also gets a servicing fee to service the loan. The SBA is guaranteeing a
lot less loans than they used to. Gas stations and convenience stores are much worse. The secondary market for
selling SBA loans has virtually dried up so only the larger banks can afford to lend to and service their
portfolio. Many of the large SBA lenders have either stopped lending temporarily or have exited the SBA arena
together. If you research enough, you'll find that only a fraction of gas station and convenience stores are being
I know what you're thinking. "I don't want an SBA loan. I've heard SBA stands for Slow Bank
Approval. I want conventional financing! I know someone that got a loan with Ever-So-Peachy Bank with low fixed
rates for twenty years!" We all know someone that got a deal like that, but the face remains, YOU probably are
NOT going to get that deal. . You might want to check and see if the banker that gave them that deal
still works there too. (Or if the bank is still in business too!)
This is also compounded by the fact that most franchise lenders for petroleum lenders are either
no longer in business or their portfolios have been bought by other franchise lenders that no longer lend on
Did I happen to
mention that defaults on gas stations and convenience stores have been at all time highs? Sorry, I
Guess what? It's even more difficult to get a conventional loan from your bank. Why is that?
Because your local bank will usually offer a shorter amortization period (A normal SBA loan will offer up to 25
year loans, fully amortized, as opposed to a 10 year balloon amortized over 15 or 20 years) Banks usually look for
a higher debt service coverage on a conventional loan than on an SBA loan. Why could that be? Could it be that
government guarantees on an SBA loan makes them more aggressive? The fact remains, each dollar purchases 20-30%
more in loan amount with an SBA loan. (If you're REALLY hell bent on having conventional financing and paying the
additional amount, you can also pay the difference on an SBA loan and pay your prinicipal off earlier) Your
calculator and spreadsheets will never lie to you.
I am not suggesting that an SBA loan is or isn't your best option for financing. It clearly is
inappropriate in many situations, especially on larger transactions. What am I suggesting is FACT is different than
PERCEPTION when it comes to financing petroleum retail properties.
(By the way, if you're already tired of reading and just want to apply for a loan, apply
conveniently here or download the form here)
How do you think your chances are looking
To further complicate the issue, almost all lenders have certain types of "hot buttons" that
they look for. Some only are concerned about the actual value of the property. Others look at cash flow. Still
others focus in on certain indexes such as fixed coverage charge ratios, debt service coverage ratios, cap rates,
borrower liquidity or other impressive sounding polysyllabic banking terms.
How Do You Know Who Focuses On What??
In general lenders look at the following criteria in evaluating a risk:
We could take each one of these criteria and discuss them, but we will focus in on some of the more important
issues for those obtaining financing.
Collateral has become more of a hot spot for many lenders today. Most lenders will discount an
appraisal 20-25% on the actual real estate value, 50% on the machinery and equipment and frequently up to 90-100%
of the good will. Let's assume you're purchasing a convenience store with real estate for $1,000,000 and you are
looking to put a $200,000 down payment towards the purchased. You may have an appraisal on the property indicating
a $1,000,000 value, but the bank is looking at it as a $700,000 property on a liquidated basis and looking to
YOU, the borrower, for additional collateral. (You can pick your jaw up
this somehow seem unfair to you?
It gets worse!!(It's ok, we've
got you covered)
Let's say you took out a home equity line from your home as part of your $200,000 down payment.
You're thinking "My lender will like this because it's my own hard earned money" WRONG. Even though you DID pay the
principal on the house down, your friendly lender looks at it as another loan (which technically it is) so they
have to factor paying back THAT loan also in the approval process.
Unfortunately, it still gets
worse!!!(We still have you covered)
The fact also remains that many borrowers will borrow the money from friends, relatives, former
associates and "people that love them" to come up with their equity. Tsk tsk tsk. Your banker does not like that
either, because if it isn't your "own" money into the deal, it's much easier to walk away from the business.
(The two most common denominators of default and foreclosure the past few years has been insufficient
equity into transactions and insufficient direct industry experience)
To complicate matters, the lender community has a very "monkey see, monkey do"
mentality when it comes to defaults and environmental issues. If they heard about a gas station that had a huge
spill and a bank had to pay for the cleanup, it send ripples of fear into the banking community, because they tink
that might happen to a property in their portfolio. The fact is, their fears are frequently overrated
and unfounded based on a lack of understanding of the system. The fact is that when either leakage or
spillage occurs on a site, the average cleanup is less than $50,000. The FACT is almost all
States have healthy LUST funds or funds allocated for cleanup in the case where insurance falls short at the time
of the leakage or spillage. The FACT is that most cleanups do not even require a gas station
or convenience store to close down for a site to be remediated.
We really could go on and on about the challenges that people face in financing their locations.
Suffice it to say that theye exist. What should you as a borrower look for and expect from the people
looking to procure financing for you?
First of all, an absolute thorough understanding of petroleum retail AND commercial
financing is absolutely necessary. If you needed heart surgery, would your first preference be
a physician who is a general practitioner? If you needed a root canal, would you prefer someone who specializes in
root canals and does them DAILY or someone who did all types of general dentistry? Don't you find it ironic that wemight insist on a specialist for a root canal that costs $1,000, yet
we'll deal with a generalist when it comes to financing our commercial property that might be in the millions of
If you really want to have someone do your financing for you, why not administer them a test and
gauge their knowledge of the industry? (Be prepared to have some embarrassed bankers). Click this link and if they
can't pass this twenty question test with a 70% passing rate, do you REALLY want to trust
them with your loan? (By the way, we're dumb as rocks if we had to pass a tast on restaurant or hotel or apartment
financing...we could care less about them...so nothing against bankers)
Specialists will almost always outperform generalists in anything in life.
Second, deal with someone with offers multiple options for financing as
well as the ability to do financing for unqiue situations. Loans can be declined by some lenders and
accepted by others for simple reasons as:
Average Monthly Gallonage
Of Underground Storage Tanks
Of Underground Storage Tanks
Offereing Fuel And Little Or No Inside Sales
Offering Fuel And Repairs
Unbranded Or Independent Stations
Card Readers At Facility
That Have Been Remediated And Await A No Further Action Letter
Where No Further Action Letters Come From Major Oil Companies
And this is just about the FACILITY,
much less the credit or experience of the borrower, how the property cash flows or other important
factors. The list is actually MUCH longer than this. You should
INSIST that the company you deal with offer multiple types of financing such as SBA,
conventional, short term and hard money.
Third, deal with people that can offer or find options for finding additional capital
into the transaction. Whether that is a seller held second, equity provided by a fuel supplier,
joint ventures, mezzanine financing, among others, the large real estate moguls of the world look for creative
financing, why shouldn't YOU?
Fourth, when looking for a company to do your financing, make sure that THEY deal
with other companies that specialize in this industry also. There are petroleum attorneys,
insurance companies, accountants, contractors and vendors that deal exclusively or high degree of specialization in
petroleum retail. You as the borrower should deal with companies that not only can provide the financing for you,
but also provided value added products and services to make you more profitable.
Fifth, when looking for your loan, deal with people that know the difference between
cost of money and return on investment and not just the cheapest rate and the lowest points on a
deal. Again, your calculator will NEVER lie to you. Frequently the cheapest rate or the lowest
points is NOT the best deal.
Sixth, deal with companies that are active in the respective industry
organizations so they are up to date with the latest trends, technologies, etc.
Uncle, Uncle... we surender! We Get The Idea... We'll apply
for a loan here!
So Who Is PetroMAC And What Makes THEM So Good?
Above all else,
we have a clue when it comes to financing petroleum retail properties.
First, it's all we do. We actually really really LIKE gas
stations! (Don't get me going about our collection of gas station collectibles). In our network
of loan officers, underwriters, processsors and consultants, hundreds of millions of dollars of C&G loans have
been originated and closed. We even have people in the organization that have owned gas stations, so how much more
first hand experience could you want? I can promise you, all of those associated with PetroMAC know more about
petroleum retail and financing these properties than 98% of the people you'll ever deal with. (Including
the people at Ever-So-Peachy-Bank)
Second, if you can think of an option for financing or a unique situation, we've probably been
there, done that and closed the loan. We act as a source and retail outlet for many large lending institutions,
insurance companies and hedge funds (many of which you can not approach directly). This allows us to negotiate a
better deal for you because of our volume of business. We offer Conventional Financing, SBA 7(a), 504, Private
Money Financing and Equipment Leasing. Some of the "unique" circumstances we have facilitated financing:
Sites With NO Financials
Quick Close Auction Sales
Borrowers With Recent Bankruptcies
Non-Citizens And Without Permanent Resident Alien
Borrowers With Little Or No Equity In Transaction
Sites Currently Being Remediated
Borrowers With Poor Credit
Even REALLY Ugly Sites!!
Third, we have the ability to engage other parties with an economic interest in
petroleum retail to team with our borrowrs to bring a loan to its fruition. Whether that be a
petroleum supplier providing equity and/or equipment into a transaction, parties interested in doing joint ventures
with borrowers or lenders providing mezzanine financing to make sure that "make sense" deals get done. Too many
good deals with good borrowers are being overlooked because it does not fit in many lender's "box." Molds are for
concrete and jello. We look for conventional and unconventional means to get these transactions done.
on years of experience and creativity to provide solutions to your unique needs.
Fourth, we ONLY deal with companies that specialize in petroleum retail, from
appraisers, environmental companies, attorneys, insurance companies, vendors, construction companies, among others.
We find these alliances to be synergistic. It has to do with who can perform the best for the borrower in all
situations. They might not necessarily be the cheapst in all situations, but to quote a famous sales person: "Why
settle for the get-by, when in the long run, the good always costs loss." Their price may be a little more, but
their cost is always less. Hear short presentations from industry professionals about:
Why are gas station/C-store
appraisals different than other commercial properties
Cut through the hoopla and find out
what's important in an environmental
Why not use just any old accountant
do to your taxes
Why do you need an insurance
specialist for your business/property?
Fifth, we have a lot of different options to provide you with the lowest cost of
capital. Again, the lowest rate and the cheapest points are frequently not your best option.
Sixth, we are active in the organizations that assist petroleum marketers in all facets of their
business. This helps us help you by keeping you advised and updated on industry trends.
We hate to disappoint you, but we don't get all deals
done. Frequently the speed of the loan approval is in direct propotion tothe organization (or
lack therof) of the borrower or broker. Some borrowers omit telling us facts that they feel are not pertinent.
Trust me, we will most likely find out and they ARE pertinent. It's the honesty as opposed to full disclosure
approach. Because of the nature of the industry, environmental issues will be discovered from time to time. It is
EXTREMELY important to disclose any present or past environmental issues, no matter how small you might feel the
issue is/was. The sooner we find out, the sooner it becomes a non-issue. Finally, some deals are just bad deals.
Don't expect us to put lipstick on you a pig.
Try and find any lender or company that will:
Assist With Purchase
Assist With Fuel Supply
Assist With Vendor Agreements
Assist With Business Projections
Consult For Up To A Year On
Strategic Business Planning
So How Do You Apply For A Loan With PetroMAC??
In order to pre-qualify loans faster, we have found that providing a certain amount of
information up front helps us expedite the underwriting of a loan. If a borrower can provide us with the following
information, it would help us a great deal. You can
click the underlined links and find the form on the PetroMAC website.
Previous Years Financials (Returns / Profit Loss Statements)
Current Year-To-Date Financials
Three Years Fuel Gallonage (Monthly)
After we have pre-qualified a transaction, this is the document checklist that we go by usually
when doing purchase financing, refinances, construction and investor owned purchased. All application forms are available here on the PetroMAC
Once you have begun the formal prequalification process, we will begin to provide free
information to you to further assist you in not only your financing efforts, but more information about running
your business profitably.