Article – Found Some Gas Stations For Sale? Don’t Overpay For Them? Find Out How Much They Are Worth

Owning a gas station and convenience store is no longer for the faint of heart. The past few years, the default rate in this asset class is the highest it has been in years. Not only is owning a gas station and convenience store more difficult than it has been in years, but gallonage throughput has been declining for some period of time. Even with the fall in the price of gas in the past year, fuel gallonage has not returned to their previous levels.

NEWSFLASH: If you’re looking to get financing, banks do NOT like lending to gas stations and convenience stores now. In reality, they really never have, but now, even more so. In recent years, borrowers could get higher leveraged loans up to 90%. Now most of the lending is confined to the 70-75% range and those are on “A” loans. Coupled with the recent economic downturns in the economy and the volatility in the past few years of the petroleum industry, banks would rather avoid them and concentrate on other properties that are less immune to economic shifts.

If you’re purchasing a gas station, is it really an opportunity or are you purchasing someone’s problem? You have to ask yourself why they are selling at all. Are they losing money? Are they having partner problems? Are they in the middle of a divorce? Are they ready to retire? Even more important, how are they valuating the sale price of the business or real estate? Many buyers overpay for gas stations and convenience stores because the seller base the sales price off of their “real” number that they do and not the numbers they declare on their financials. How much experience does the business broker or realtor have selling gas stations and convenience stores and how did they arrive at a sales price? If someone came up with a sales price solely based on sales comps from other stations, that simply will not fly. If you do not have verifiable cash flow, you can buy the station, but you will have difficulty financing it. Have they lowered the price of fuel for a period of time to increase volume and inside sales to artificially drive up the sale price? In todays’ economy, they’re only going to get financing off of what is declared in their returns. That is an absolute.

The seller might offer additional documentation to show purchases from a fuel supplier or oil company or purchases from their main vendors to show YOU how much they have purchased, however, lenders will not approve loans just because a seller can document purchases. In addition, most banks do not finance good will (or “blue sky”) value of an enterprise, so you’re definitely going to have to base your offer off of what can be verified.

In all cases, if you have found a gas station for sale and will be looking for a gas station loan, always verify what the site will qualify for with regards to financing based on cash flow. Gas station loans are denied based on unverifiable cash flow more than anything else.

Want to learn more about things you look for and avoid when buying a gas station? Gas Stations For Sale

Harold Jaynes has been with PetroMAC since 1999. If you are looking for gas stations for sale make sure you know the value of the business or the real estate prior to signing a purchase agreement.

Contract PetroMAC today if you need a gas station loan. We can also assist you in negotiating your purchase agreement, your fuel supply agreement with a jobber or with an oil company and we can assist in negotiating your agreements with all your vendors. We also can assist you with your business plan.