How do you finance a gas station purchase?

Almost every gas station deal starts in the wrong place — with a price. The question that actually decides the loan is simpler:

Are you buying the property, the business, or both?

Those are three different loans, from different lenders, with different documents and different timelines. Answering it first saves a fortnight.

Buying both — the property and the operation

There is real estate securing the loan, so terms are generally longer and payments lower than a business-only purchase.

Most of these go through the SBA 7(a), which can wrap the property, the business, the equipment and some working capital into one loan for an owner-operator. Larger deals sometimes use a 504 structure, putting the real estate on a long fixed-rate loan alongside a bank loan.

Where the SBA does not fit — a buyer who will not occupy it, a purchase above programme limits, a deadline that cannot wait — conventional commercial and private lenders take it instead, generally with a larger deposit and a shorter term.

Buying the business only, leasing the site

No land and building means no durable real estate securing the loan. What secures it is the business: equipment, inventory, cash flow and your personal guarantee. Terms are typically shorter.

Here the lease is the file. A lender is funding a business that exists only as long as you can occupy the site, so the remaining term, the renewal options, the rent and the landlord's consent to assignment get read as carefully as the financial statements.

A lease with three years left and no options will stop a ten-year loan, and it is better to know that before you agree a price.

What every station lender reads first

The environmental report sets your closing date

This is the single most useful thing to know about station deals. It is not the loan that decides when you close — it is the Phase I environmental site assessment, and the Phase II that follows if the first one raises anything.

Order the Phase I as early as your contract allows. More station closings slip on this than on anything else, and it is almost entirely a scheduling problem rather than a lending one.

What to have ready

• Purchase contract
• Two to three years of business financials and tax returns
• Fuel volume reports — gallons by month
• Inside sales figures and product mix
• Tank details: age, material, monitoring, testing
• The fuel supply or brand agreement
• The lease, if the site is leased
• Your resume or operating history
• Entity papers: articles, operating agreement, EIN letter
• Proof of funds for your contribution

Two parts to one price

Station deals are usually priced as two things at once, and it helps to see them separately.

A site offered at $1,400,000 might break down as $900,000 for the land and building and $500,000 for the business — the equipment, the inventory and the goodwill.

• Buying both, you are financing $1,400,000, with the real estate carrying the file.
• Buying the business only and leasing the site, you are financing $500,000 against a going concern and a lease — a smaller loan, and usually a shorter term.

The smaller loan is not automatically the easier one. Without the $900,000 of real estate behind it, there is nothing durable securing the debt.

Special-purpose property means a bigger deposit

A station is a building that suits one use and few others. That affects the appraisal, the insurance and how much of the price the buyer is expected to bring. Budget for more than you would on an ordinary retail building, from the start rather than at term sheet.

The three questions to settle before you offer

1. Property, business, or both? It decides the lender list.
2. How old are the tanks, and what is their history? It decides the environmental work.
3. If leased, how long does the lease run including options? It decides whether a loan term is even possible.

What would change the answer

Programmes, eligibility, deposits and timelines all vary by lender and by deal, and nothing above is a quote or an offer. What does not vary is the order: decide what you are buying, start the environmental early, and have the volumes ready.

If you know which one you are doing, start there — we keep a separate page for buying with the real estate and for buying the business alone, because they are separate loans.