- A gas station loan can help you buy a new gas station, gas station or convenience store, expand an existing one, or increase the number of gas stations you own.
- Gas station financing or a business line of credit can also help you with the day-to-day costs associated with operating a gas station or convenience store.
- Due to the fact that many gas station customers only accept cash, it can be difficult to obtain a loan or find a lender due to a lack of proof of income.
What is a gas station loan?
A gas station loan is financing or debt that gas station owners can use to purchase a new gas station or expand an existing business. You can also use a gas station loan to boost your cash flow to help pay for day-to-day expenses such as utility bills, payroll, or inventory.
As with any other business financing, a gas station loan or financing can come from a number of sources or loan programs. The type of financing you choose will depend on your goals, business history, business credit, and a number of other factors.
How a business loan can help your gas station
As any small business owner knows, there are many costs associated with running a business like a gas station or convenience store. Financing can help you get the money you need to buy or build a gas station. A gas station loan can also help you increase your working capital or cash flow to pay for normal operating costs or unexpected expenses.
Here are some ways a borrower can use their funding:
- Outright purchase of a gas station or convenience store
- Purchase commercial property to expand footprint of existing gas station
- Pay for upgrades or renovations at the gas station
- Buy real estate and equipment to build a new gas station
- Fund other projects to grow the business, such as adding a car wash or other amenities
- Cover payroll
- Purchase of inventory
- Pay utilities
Types of loans for gas stations
There are a variety of small business loans that can be a good option for gas station owners.
Business bank loans
A business bank loan may be suitable for the gas station industry, depending on your qualifications and type of ownership. Commercial loans and small business loans can allow you to use the money for a variety of purposes, from buying a gas station to paying day-to-day expenses associated with running a business. The type of loan you qualify for will depend on your business credit score and the quality of your finances, as well as the loan terms and repayment terms.
Commercial real estate loans
If you are looking to buy an existing gas station or build a new one, a commercial real estate loan may be a good option. You can also use a home loan to refinance and cash out your existing property. You’ll probably need a down payment with this option as well.
Small Business Administration Loans for Gas Stations
The Small Business Administration (SBA) offers several loan options for gas station owners that are more flexible than a traditional mortgage or home loan. SBA loans are generally more flexible than other financing, although there may be stricter conditions.
As the most common loan program, an SBA 7(a) loan can be used to increase short- and long-term working capital, refinance business debt, or purchase equipment. However, you must have eliminated your other financing options before seeking this type of loan.
An SBA CDC/504 loan is another financing option that allows a gas station owner to purchase or construct existing buildings, land, new facilities, machinery and equipment. You can also use it to improve existing buildings, grounds, utilities, parking lots, and landscaping. However, unlike the SBA 7(a) loan, you cannot use this loan for working capital, to purchase inventory, or to refinance debt.
USDA Business and Industry Loan Guarantees
The US Department of Agriculture has a rural development program for those who want to run a rural business, including a gas station. These USDA Business and Industry (B&I) loans are available to gas station owners who want to run a business located in an area with less than 50,000 people.
A USDA B&I loan can be used for:
- Business development
- Buy real estate
- Purchase of equipment or machinery
- Purchases of supplies and inventory
- Refinance debt to improve cash flow or create jobs
This loan requires collateral, usually your gas station. The USDA allows certain lenders to provide financing, and they will negotiate interest rates with you individually.
Business line of credit
If you need financing to cover equipment, inventory purchases, or day-to-day expenses, a business line of credit may be a good choice. Similar to a business credit card, you can use any amount from your line of credit up to your limit, and you only pay interest on the amount you borrow. It can also be easier to qualify for a line of credit than a traditional business loan, which can be very helpful for a gas station owner.
How to qualify for a gas station loan
Eligibility for a gas station loan depends on the type of loan you decide to apply for, but there are some general requirements that any lender will ask you:
- Professional and personal credit history and ratings. This is by far the most important factor when applying for a loan. Your credit score determines the risk that a bank or financial institution will lend you money.
- Your income. In order to determine how well you will be able to repay the loan, the bank will want to know your business income. Again, since many customers at gas stations and convenience stores use cash to pay for their items, you may not have a good paper trail to prove it. You will likely have to rely on your tax returns to show your annual income.
- Debt to income ratio. A lender will want to know what other debts you owe to help them determine if you will be able to repay them on the new loan.
- Assets and Collateral. A financial institution may ask you to provide security to ensure that if you are unable to repay the loan, they have something to take and sell to pay off the debt. It could be your gas station, your equipment or even your personal assets like your house or your personal money.
- Assembly costs. You will likely have to pay some fees to the lender to process your loan application, so you will need to have this money up front.
What do you need to apply for a gas station loan?
In general, you’ll want to have the following on hand when applying for a gas station loan:
- Tax returns (individuals and businesses)
- Income statement and balance sheet
- Bank statements (personal and business)
- Identity document (driver’s license or passport)
- Leases
- Commercial licenses
- Articles of incorporation
- Your CV
- Any financial projection
- Collateral
You may need to provide other documents depending on the type of loan you are applying for.
Which lenders offer gas station loans?
In addition to the loans mentioned earlier in this article, there are a number of lenders that offer gas station loans:
- JPMorgan Chase
- Capital one
- Wells Fargo
- Capital of the green box
- CREFCOA
- RMC Funding
- fast bridge
If you have an existing relationship with a bank or financial institution for personal banking or other business banking services, you may be able to secure a gas station loan with them.
Is it hard to get a gas station loan?
Unfortunately, due to their operating model, it can be difficult to obtain good financing options for gas stations from traditional lenders. However, with the right preparation – especially knowing and improving your business credit score – there are ways to get gas station financing. Nav helps small business owners of all kinds understand the factors that go into your business’ credit rating and offers tools to find the financing you’re most likely to qualify for. Create an account today to start.
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