What's The Best Way To Obtain Gas
Station Construction Loans? Is Gas Station Construction Financing Even Available?
When looking to do construction financing, be it a ground or a raze and
rebuild, your banker will probably not be as excited about your project as you will be. Regardless of what a great
piece of land you might own or there isn't any competition for fifty miles or the company you've retained to do a
feasibility study has given you all positive indications, a lender is still going to consider it a start-up…because
Lenders will certainly have preferences on doing construction loans. In reality, almost all
types of financing can work, be it SBA 7(a) or 504, conventional or even private financing.
Lenders prefer borrowers who currently own gas stations / convenience stores over those who do not
Lenders prefer projects where the land is currently paid for instead of land where there is a note or
yet to be purchased
Lenders prefer projects where everything has been priced out by a reputable contractor as opposed to
where they are simply using a square foot multiple
Lenders prefer projects where permis have been applied for and approved over projects where this has
not been done.
Lenders prefer projects where there are additional income streams, i.e. additional business or salaries
as additional sources of borrower revenue while a site is being constructed
Lenders prefer projects where there have been feasibility studies done by a reputable company over ones
that do not have them. Traffic counts and fuel projections by a fuel supplier are helpful but are
not "arms length" and are insufficient.
Lenders prefer projects where the borrowers have a business plan (not computer generated) as opposed to
those who do not.
Lenders prefer projects where site plans have been drawn up as opposed to projects which haven't.
If you have not owned or managed a gas station or convenience store and
have yet to purchase the land for the transaction, your request will probably fall on deaf ears for the most part.
Construction financing is a process that usually takes a long time to begin with. If you really have not started
the process, most lenders will not be interested in even talking unless the loan amount is small.
Two big fears that lenders with construction loans are:
||Construction Not Being Completed
Due To Unforeseen Factors
Lenders will almost always factor in a contingency during the
construction phase, usually 10%. If you do not have this factored in your costs, be prepared to do so. Depending on
the area where you live, construction can be halted in winter due to bad weather. Construction can be halted due to
not having all necessary permits. We have frequently had borrowers approach us for unfinished projects. Perhaps a
bank approved a certain loan amount and there were cost overruns and the bank would not lend anymore. The borrower
is still making interest payments with an unfinished building and a grumpy banker and borrower. Nobody wins
Whether there are two separate loans, or a construction loan that turns into a permanent loan,
do not be misled about the loan-to-value (LTV) that banks represent they will do. Usually SBA will offer a higher
advance than a conventional loan, but because banks want to be fully collateralized, it really ends up being in the
70-75% range max. The reasons why is this:
Banks discount collateral in the following manner. Land, building and improvements are usually
discounted by 20-25%, depending on the lender and machinery / equipment are usually discounted by 50%. Since there
will be no good will at the completion of the project, the bank will not discount it (usually the discount is
90-100% and no value is given) Let's say the appraisal comes back of $2,000,000 "as completed" or "as built", of
which $1,700,000 might be real estate/building and $300,000 of equipment. At a minimum the land and building will
be discounted 20% and the machinery and equipment will be discounted 50%.
This means the actual collateral value of the site is $1,510,000 ($1,700,000 X .8 = $1,360,000 +
$300,000 X .5 = $150,000. $1,360,000 + $150,000 = $1,510,000) It's even lower if the discount rate is 25% on land
and building instead of 20%. If the bank is lending you 80% of $2,000,000 ($1,600,000) you guessed it, you are
undercollateralized. This means the bank will be looking for an additional $90,000 in collateral. Does this mean
they will turn you down, not necessarily, but the chances are significantly higher that they will.
Don't assume that because you have a $2,000,000 that this will satisfy them. It won't.
||Have Your Homework Done Prior To
Calling A Lender
||Have Plans Drawn Up As Opposed To A
Vague Idea Of The Building
||Do A Professional Business
||Know If You Will Be Branded, What
Brand And Know Who Will Supply You
||Have A Good Bid From A
||Try To Use Contractors That Have
Built Many Gas Stations
||Contact Local City/County Offices
About The Permit Process
||Have A Feasibility Study Done If
PetroMAC has done many gas station, convenience store and truck stop
loans and can assist you in ALL phases of the project, as well as negotiating with vendors and
Click here to find out the documentation you will need
for a construction loan.
Click the financing tab above to find different financing options for your project.
To prequalify for financing, download the following forms and provide
the following information and fax to (202) 478-1811 or email to firstname.lastname@example.org:
Completed Tri-Merged Credit Report or Credit Authorization
So what are you waiting for? You can convenienently apply online for a loan here or
download the prequalification form here. First time inquiries should inquire at email@example.com. Let us prove to you
that PetroMAC truly "pumps capital into YOUR C-store."