Board Topic: Buisness Loans
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Buisness Loans

Posted by: Yogi Jan 13 2004, 01:10 PM

Hi,

I am interested in purchasing a gas station and would like some guidence on the loan options available. Generally, I have not permanent immigrant status yet, however, currently do have a credit histort and a mortgage, which is about 3 years old.

The kind of information I am after is:

Where should I go to get the loan ?
What is tpical of a minimum deposit ?
Will my immigration status affect any decsions ?

Thanks

Yogi

Posted by: loanuniverse Jan 13 2004, 07:02 PM
Yogi:

You happen to send this question at the right time. Within the last couple of weeks, I have been involved in a couple of gas station deals, which refreshed my memory regarding the industry. Let me see if I can answer your questions.

Where should I go to get the loan ?
This one is going to be a problem. A lot of banks do not like to finance gas stations. First, the property is highly specialized with a lot of built improvements that can only be used as a gas station, which lowers its marketability. In addition, you always have the possibility of environmental problems.

Nevertheless, there are always banks willing to make an exception. I am also sure that there are lending officers that are gas station specialists, which must have done a couple of dozen gas station deals and feel comfortable doing them. I would say that if you have a friend that knows the business, he could probably refer you to a lender. Another source for a referral will be the seller. A motivated seller will send you to the banker where he is getting the financing for sure.


What is tpical of a minimum deposit ?
If you are buying the business, then a banker will want to see your leverage remain under 3.00X, which translates into three parts debt and one part net worth. If you are buying the business and the property where it is located you can probably get away with a 20% equity contribution. {The estimated value will include the property and something called “going concern”, which is the added value of the existing business}. By the way, these are probably the right terms or definitions, but I am no appraiser.

I am not familiar with the equity contributions required by a lender that is not a commercial bank. I suspect that they might be smaller. But I am sure that their rates are higher.


Will my immigration status affect any decsions ?
Chances are that the commercial bank will not even ask about it. They will ask for financial information, experience in the industry and maybe some background. In fact, I have underwritten several loans where the owners are foreigners. The corporation that will be formed to buy the business will be the borrower . Your involvement will be limited to a guarantee.

Hope this helps.
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