How to Finance a Gas Station Purchase

Buying a gas station is two purchases wearing one price tag: a fuel retail business, and — sometimes — the dirt underneath it. Which of those you are actually buying decides your lender, your loan type and your down payment before anything else does. Get that answer straight first and the rest of the process follows it.

The first question: business only, or property too?

Business only. You are buying the operating company — the fuel contract, the inventory, the goodwill, the licences — and leasing the ground from a landlord. There is no real estate securing the loan, which changes everything about how it is underwritten. Lenders look harder at the numbers the business produces and at you personally, because if the deal fails there is no building to sell.

Property and business together. You buy the land, the canopy, the tanks, the store and the operating company in one transaction. This is the easier of the two to finance, because real estate is collateral a lender understands and can value. It also costs more up front.

Borrowers routinely arrive not knowing which one they are buying. Read the purchase agreement before you call anyone: if it conveys a leasehold interest, you are buying a business.

What a lender actually examines

Fuel volume, in gallons. Monthly gallons pumped is the number that opens the conversation. It is verifiable against supplier records, and unlike reported profit it is hard to dress up.

Inside sales. The store margin often matters more than the fuel margin. Fuel moves at thin margins and brings people to the door; the sandwich, the coffee and the cigarettes are where the money is. A station with weak inside sales is a harder file than its pump volume suggests.

The fuel supply agreement. How many years remain, what the branding obligations are, and whether it transfers to you. A short remaining term is a real problem: a lender is financing twenty years of debt against a contract with three years left.

The tanks. Underground storage tanks are the single biggest environmental exposure in this asset class. Age, material, monitoring records and any history of a release all matter. Expect a Phase I environmental assessment, and expect a Phase II if the Phase I finds anything.

Your experience. A first-time operator buying a station is a different file from an operator adding a fourth. Not disqualifying, but it changes what is asked of you.

Documents worth gathering before you call

• Three years of business tax returns for the station
• Trailing twelve months of fuel volume reports
• Inside sales reports, separated from fuel
• The purchase agreement
• The current fuel supply agreement
• The lease, if you are buying the business only
• Tank age, type and compliance records
• Your own tax returns and a personal financial statement

You will not have all of it at first contact. Volume, inside sales and the purchase agreement are enough to know whether the deal is placeable.

What usually goes wrong

The environmental report comes back dirty. This is the most common reason a fuel deal dies. It surfaces late, after money has been spent on appraisal and legal. If the seller has a recent Phase I, ask for it early.

The fuel contract does not transfer. Some supply agreements require the supplier's consent to assign, and some suppliers use that moment to renegotiate terms with you rather than the seller.

The seller's books do not match the pumps. Cash businesses are often reported conservatively. That is between the seller and their accountant, but a lender can only lend against what is documented — and the gallons will be checked.

Where to start

Tell us what you are buying, what it pumps, and whether the real estate is included. That is enough to say whether it can be placed and roughly what it will take.