Hello,
I need help and advice in construct the best creative financing for a gas station purchased. Please adviced.

The asking price is $1.35 mil and the primary owner willing to carry some if have to.
They have owned the business for at least 2 years going on third. The reason for selling is disagreement between partnership.

The P. Owner said I can assume their loan if I want to. The original loan was $900 and the balance is around $850 and the interest is prime + 1.75.

The monthly NOI is $28,141.00 and the debt service is about $7,000.00. This is the lower estimate of the figures. Owner indicated that they do not report everything due to tax purposes. They willing show all books and sales reports once we asked. At the time of meeting, owner did bring out the previous week sales reports for review and said to make her a list of what we need tosee, and she'll get it for us, since they don't have a recording system.

The business seem to do well as mention. We count the traffic and it seem reasonable.

So how should I go forward with this in the best possible ways. Should I assume the loan to save cost and get and SBA loan for the other part. If possible, I would like to put little or no money down. What are my creative financing options.

Your attention and assistance is highly appreciated.
DVC

At $1.3 M I am assuming real estate is included with purchase and everything trade related is fine i.e. new tanks, clean property, c-store etc.

Option One -
The simple option here is to assume the mortgage, put a down payment down and have the seller assume the rest. If there is a small short fall in the financing you can get a temp loan from friends, family our your local bank. If there is a larg short fall, option two (an all out purchase will be the next best option).

Option Two -
Under this option you would but business with a combination of a first lien loan, seller financing and your down payment. I do not recommend assuming the current mortgage (even though you may end up with a higher interest rate now) because the second loan that you will seek will have to be a second lien almost no one will hold a second lien position on an unseasoned purchase (It is possible but its most of the times it does not work out).

If the gas station is branded i.e. Shell, Citgo, Mobile, Exxon etc……… at about 20-25% down you can get a regular bank loan. At 10-15% down you can get an SBA loan. Your credit, personal expenses and most importantly your experience will be the factors that determine if you get a loan. You should start getting together a list of documents such as;

(1) Executive summary (2-3 paragraphs with details on what’s going on)
(2) last 3 years of financials on the gas station,
(3) environmental documents on the property
(4) copy of contracts with fuel brand and or fuel distributor
(5) your personal resume
(6) a personal financial statement (showing your assets, income and expenses)
(7) digital photographs of the property (inside, outside and street scene)


You can If you have any questions you can email me or send me a private message. Thanks!

Hi Read about your post on gas station financing.

I am looking to buy a 1.8 million gas station. I was looking into financing, can you please give more details on SBA financing and how is it different from regular bank financing and would I be able to get that with 10-15% of down payments ?

Thanks in advance

These are general guidelines and may change once the lender sees actual the numbers on the gas station and the borrower.

For conventional financing, most banks lend 50% to 65% of the real estate value. Some lenders will go up to 75% loan to value (LTV) on real estate. Very few lenders will go higher than that but it is possible to get 85% LTV or more for exceptionally strong branded gas stations with very strong cash flow and debt coverage and very strong borrowers. For the most part, I am comfortable saying I can get you up to 75% LTV on the real estate value.

On the SBA side, it is possible to get 85% to 90% LTV on the real estate value. Most lenders will go 75% to 85% LTV for gas stations but a few will go up to 90% LTV. Generally SBA lenders are more comfortable lending up to 90% LTV on owner occupied office, retail or even mixed use buildings than gas stations. And you can probably finance 50% of the business value as well through the SBA.

The biggest differences between conventional financing and SBA loans are:
1. LTV ratios for conventional financing are generally lower than SBA loans although there are exceptions.
2. The SBA requires the lender to get copies of tax transcripts directly from the IRS. No exceptions here. This can cause the deal to fall through sometimes.
3. You can finance part of the business value through SBA programs but not through conventional financing. Few conventional lenders finance business acquisition.

If you are looking to purchase a gas station, make sure the seller agrees to provide at least two years of business tax returns and interim financial statements because without them getting financing is going to be very difficult. Hopefully the tax returns show a profit and have enough cash flow to support the debt otherwise financing is difficult.

Yes you can get away with 10%-15% down payment but that is only on the real estate value. You will need to come up with 50% of the business value. Also, you will need some money for inventory, working capital, startup costs, etc. and 3% to 5% for closing costs.

Hope this helps. Good luck!

Hi DVC,

Supposing that you have experience successfully running this kind of operation and you have some financial credibility, there are a number of ways to acheive financing. Please contact me, we love the hard to do loans.