Financing gas station purchase

Board Topic: Buying a gas station
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Buying a gas station

Posted by: Sohail Aug 1 2004, 01:10 AM
I am looking to buy a running gas station. I have no prior experience in the field. I was wondering what the financial requirements were. I have good credit so that should not be a problem. My key questions related financing are the following.

- What is the minimum down payment required.
- What are the usual down payment requirement


Thanks
Sohail

Posted by: Apexlending Aug 1 2004, 03:57 AM
Well first off you would need to see if the numbers make sense. What is the purchase price including ff&e , inventory ? What is the NOI ? What do the financials look like ergo showing a snapshot of whether the numbers make sense. How many pumps are there and # of gal per month ? A good station will give you at least 80,000 gal per month sales and inside sales a min of 50,000 in sales. Gas sales should pay your rent plus . As far as financing to get a business loan banks look at your experience , if you have a partner that you can trust and has the experience that would help obtaining the loan. You may want to get a line of credit to make the purchase banks usually require 2 years experince for a business loan. If you have any questions I woould be glad to answer mlyles@moneyhaus.com .

Good luck

Posted by: loanuniverse Aug 1 2004, 12:13 PM
Sohail:

Whenever someone asks me about gas station financing, the first thing I say is that not all commercial lenders do these type of loans. Mostly because of possible environmental problems and the fact that gas stations are usually only good for one thing “selling gas”. This defines those properties as “single use” and makes them less desirable to lend money on.

Having said that, your question made me think of previous loan requests that I might have analyzed for gas stations, and realized that none of them were for the business alone. We were either financing a purchase of the property, financing the construction or giving a very small working capital line cross-collateralized with an existing first mortgage on the gas station. Of course the cash flow from operations of the gas station is usually the primary or secondary source of repayment for those loans.

I don’t think there is a standard down payment or minimum down payment. The term down payment is more appropriate to the transaction between the seller and buyer. The lender is looking for a “loan-to-value” percentage. It is true that this loan-to-value can be achieved with your equity, but it can also be achieved with subordinated financing.

To give you an idea, of the kind of financing that is out there if your request is granted, within the last few years I have analyzed loans that were approved with loan-to-values ranging from 50% to 75% for gas stations.

Good luck.


P.S: I know you did not ask but, ” I have no prior experience in the field” will be hard to overcome from the point of view of a lender. All of the gas station owner’s that I have underwritten loans for have managed from one to a dozen stations before or are just adding another one to their portfolio.
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