• Gas Station Business and Real Estate Loans

  Posted by Julio Munoz on March 4, 2025 at 2:02 am

  What are the eligibility requirements on gas station business and real estate loans. What are the requirements to get a gas station business and real estate loan? How do you qualify and get pre-approved? Do you need experience? Can you get trained from the seller? What are the EPA concerns, permits, credit scores, reserves, income, documents, and other requirements?

  Tom Miller replied 1 year, 7 months ago 2 Members · 1 Reply

  • Gas Station and Real Estate Loans
  • Gas Station Business Loans
• 1 Reply

• 

  Tom Miller

  Member

  March 4, 2025 at 2:23 am

  Requirements for Loans for Real Estate and the Business of a Gas Station

  • Purchasing a gas station requires buying a business and a piece of commercial real estate, both of which need financing.
  • Here is a detailed list of qualifying criteria:

  Primary Qualification CriteriaCredit score Criteria

  • Conventional lenders: Usually a minimum of 680 or higher.
  • SBA loans: At least 650 (some can go down to 620, but not many).
  • Hard money lenders: Interest-only loans are available with credit scores of 600.

  Years in Business

  • Most lenders prefer two or more years of managing a gas station or convenience store.

  Some lenders may accept:

  • Other related retail management or business management work
  • Employment in the oil industry
  • Seller training contracts (we will discuss later)

  Initial Payment

  • Conventional: At least 25%-30% down payment
  • SBA 7(a): 10%-15% down payment
  • SBA 504: Startups pay 15%, established businesses 10%

  Seller Training Provisions

  • Lack of experience may be accepted if the seller:
  • Gives documented training for a certain period (usually 4-8 weeks)
  • Hire an experienced manager who can run the business.
  • Training is built into the purchase agreement.
  • Demonstrates sufficient business management skills.

  Monetary Criteria

  Sufficient Funds

  • In most cases, 6-12 months of operating expenses and loan payments are set aside.
  • First-time owners may need to set aside more money.
  • Some lenders consider this a percentage of the amount borrowed (10-15%).

  Debt Service Coverage Ratio (DSCR)

  • 1.25x for most lenders (the station must produce $1.25 for each $1 debt payment).
  • Some lenders may require a 1.35x coverage ratio or even higher with novice owners.

  Personal Financial Requirements

  • No bankruptcies or open financial cases for the past 5 years.
  • Proof of employment for the past 12 months.
  • Not too many debts on record.
  • Typically, personal guarantees are necessary.

  Environmental Considerations

  Environmental Assessments

  • A Phase I Environmental Site Assessment (ESA) is always needed.
  • Phase II ESA in case contamination is suspected.
  • If it is confirmed that a site is contaminated, I must have a remediation plan in Phase II.
  • Underground Storage Tank (UST) Requirements
  • Documentation of the age and condition of the tank.
  • Availability of leak detection systems.
  • Must meet today’s standards.
  • Tanks must be insured.

  EPA Compliance

  • Documents showing current compliance with environmental standards.
  • List of previous breaches or repair work done.
  • Operator certification proof.
  • Spill control and containment plans.

  Documentation Requirements

  Business Documentation

  • 3-5 year business tax returns for already operating stations.
  • Profit and loss statements.
  • Current balance sheet.
  • Inventory reports.
  • History and volume of fuel sales.
  • Convenience store sales analyzed.

  Personal Documentation

  • Personal tax returns for the last three years.
  • Personal financial statement.
  • Relevant work experience CV.
  • A business plan is particularly important for novice buyers.
  • Proof of funds for the down payment.

  Permits and Licensing

  Required Permits

  • Permits to sell fuel and food (only if needed).
  • Permits for alcohol and tobacco (only if needed).
  • Local and state business permits.
  • Permit from fire departments.

  Insurance Requirements

  • Insurance for environmental issues.

  Commercial Property Insurance

  • General liability insurance
  • Insurance for business interruptions

  Workers’ Compensation Loan Program Options

  • SBA Loans
  • 7(a) program: $5 million maximum, 10-25 year terms, any purpose.
  • 504 program: The real estate portion is up to 25 years.
  • Working capital loans for business operations.

  Conventional Commercial Loans

  • Most commonly require a 20-25% down payment.
  • Term of 5-10 years with balloon payments.
  • Financials are usually stronger than SBA loan options.

  Specialized Petroleum Lenders

  • Industry-specific lending programs.
  • There may be looser terms for more seasoned operators.
  • Often, they have streamlined underwriting for gas stations.

  Pre-Approval Process

  • Personal financial information and relevant business experience need to be compiled.
  • Approach lenders with gas station financing experience.
  • Complete primary application.
  • A conditional approval letter is given.
  • Begin property search with financing parameters in place.

  Considering these businesses ‘ environmental and operational issues, working with banks that understand gas station financing is vital.

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