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Financing Gas Stations and Convenience Stores 101

By: K John Schnieder

How gas station owners can finance or re-finance gas station real estate. Most banks don't want to lend on this type of property because they do not understand this business. Kendall Schnieder has been in the commercial real estate finance business since the mid 90's and has a very close working relationship with some very aggressive banks.

Monday May 11, 2009

For the past year, financing gas stations has been rather difficult, but that is all changing now. I say that with one clarification; do business with banks that know gas stations. Most do not know what they are getting into when they say the big 'temporary YES' to offering you a loan. You have to understand that it has been slim pickens for many lenders and they will jump at just about anything at first, but then after you have invested many hours and sent in all you financials, they discover that underwriting a gas station isn't the same as a single family residence. So be sure to work with 'knowledgeable' brokers and lenders, you will save yourself a lot of time and effort, and you can actually walk away with some cash in hand.

One other note before you run out to get that loan, be aware that SBA does not like ARCO stations. The SBA will not fund ARCO because of ARCO's contracts that pretty much leave the lender out in the cold if the borrower runs into a default situation. ARCOs can be financed through conventional lenders, but they are lending only on the value of the real estate, and will not consider business and inventory values. Loan to value is as high as 70% which means that the borrower must come up with 30% down plus closing costs. As of this writing, these rules apply only to ARCO franchises, I do not know of any real problems in obtaining loans for either independents or major distributors. Of course, the lenders are looking very close to credit issues and profitability of the business.

Now for the good news. The time for obtaining loans for gas stations and convenience store combinations, especially if the loan includes real estate, has never been better. Because of the credit crunch, sellers are making some very good deals on the business and the real estate. For the savvy business owner, now is the time to either purchase a gas station, or refinance your existing business for one very good reason, INFLATION! If you purchase at reduced prices and fix your cost of ownership, then inflation is going to be your friend. Also, you need to look at the potential of 'forcing' inflation into your business. Make the right adjustments, such as creating a clean environment for you patron's visit will increase your business many times. People do not mind paying a few pennies more for a clean brite atmosphere. And keep those pumps and islands sparkling, you will see a dramatic increase in return business.

Gas station financing can be a very pleasant experience. And if you choose carefully who you do business with, you can get your money in as little as 30 days after you have submitted all of your paperwork. SBA will lend up to 90% on qualified gas stations. If you station is in a rural area, be sure to ask you lender about a USDA loan. USDA loans are guaranteed by the government, and they are aggressive in their underwriting to place the loan quickly.

Information about the Author:

For more information on how you can obtain a gas station loan please visit Gas Station Financing Kendall Schnieder works with preferred SBA lenders in the Western US and specializes in commercial real estate loans. He can be contacted at

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