You’d think that one would put a more encouraging title for an article, but it’s true. The title could have been: “Gas Station Financing – Are You Ready For Some Torture?” The fact of the matter is, gas stations and convenience stores with fuel have never been, nor will they ever be, the darling of the lending industry. If you could get someone at a bank to tell you what they really thought of them, they’d probably tell you that they can live without them (although they have NO problem receiving millions of dollars of deposits into their commercial accounts).
Let’s pretend for a second that you present a package to a lender (whether you are a borrower or broker) that would make an underwriter lick their chops from how thoroughly you’ve put it together. When they see it’s a gas station, it’s probably going to get put on the bottom of the stack whether it’s conventional or SBA because most bankers would rather work on a medical practice loan, self storage facility, veterinarian clinic, just about ANYTHING other than a gas station.
Some of the biggest problems that occur over and over submitting a gas station loan never seem to change.
First, regardless if it is acquisition financing, refinancing or construction financing, many packages do not have a clear summary about what the borrowers are looking to do. Not only does it not indicate what the borrower wants to do, many times the lender can’t even tell who the borrowers are in the borrowing entity and what per cent they own of the company, if it is a transaction where there are multiple borrowers.
Second, many times there is not a clear usage of proceeds. It’s one thing to put a purchase price and a down payment, it’s another thing to remember inventory, working capital, closing costs, fees, etc. Many times when you are pushing the limits on loan to value (LTV) on a deal, if these other costs are not calculated, the deal probably will not fly. Surprises are for birthdays. Try and minimize your loan surprises, which you inevitably will have.
Third, keep the financials current. Many times people have personal financial statements that are 6 – 12 months old. Many times the year to date profit/loss statements are 3-6 months old. You won’t be getting a commitment letter if you have stale financials and if you do, you will have to update the financials prior to closing as a condition to close.
One of the biggest things you can do is to be prepared to WAIT. Not that long ago, you could get a gas station / convenience store loan done usually in three to four months. Now, it is not unusual for funding to take at least six months and those are on clean deals. If you are purchasing a site, you MUST negotiate longer than three months to obtain financing. If you are refinancing your site due to a note due, you MUST give yourself at least a half year for it to happen. If you are trying to get construction financing for a gas station, you’d better just be prepared to wait indefinitely.
If you’re looking for a gas station loan, the time to learn patience is now.
Contact PetroMAC today if you need gas station or convenience store financing. 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.