Working to grow your gas station business? Whether you’re looking to buy an existing gas station, obtain new equipment, refinance existing debt or get working capital, there are gas station financing options for you.
How Will You Use Your Gas Station Loan?
Finding the best gas station loan for your business can help your company grow as well as help you cover operational expenses, repairs and other bills that you might not have the capital to pay. Let’s take a look at a few reasons you might seek a business loan for a gas station.
Expand Your Gas Station Business
Are you interested in acquiring another gas station? Perhaps a competing gas station is going out of business or the owner’s retiring and looking to sell. Regardless of the way you’re looking to grow, the right financing for your business can help you reach your goals.
Complete Renovations
Looking to upgrade your fueling station or mechanic’s bay? Or perhaps you’re interested in building an addition on your commercial property. Whatever the case, if you’re seeking to renovate your existing gas station, you have choices in funding options.
Add Equipment
Have you been holding off upgrading your equipment? In the fueling industry, keeping equipment up to environmental regulation standards is critical. Don’t let your equipment become outdated. If your fueling pumps and storage tanks have seen better days and you’re looking to upgrade, consider equipment financing.
Pay Bills
If you’re experiencing a slow season and need an influx of cash to help you get by, consider working capital financing. This type of funding can help you cover the following types of expenses:
- Bulk fuel
- Payroll
- Utilities
- Rent
- Insurance
- Maintenance
How Much Can My Business Qualify For?
Best Financing and Loan Options for Gas Stations
There are several types of commercial gas station loans and financing options. Review the details of some top funding solutions and determine which one is best for your business.
Term Loans
If you’re searching for a business loan for your gas station, consider a term loan. Once you’re approved for a term loan, you get a lump sum of funds. Business term loans range from short term to long term, and there are often no limits on the use of funds. Short term loans are meant to be repaid in about a year or less. Loans with longer repayment terms of 1-5 years or more are also available.
Gas station financing rates will depend on factors such as your gas station’s time in business, your yearly revenue and your credit score. However, longer term loans typically have lower rates than short term loans.
Business Lines of Credit
Revolving business lines of credit can provide your business access to funds when you need them and allow your credit line to be replenished as you pay down your debt. You could obtain a cash advance without a fee.
Plus, you pay interest only on the amount you borrow, when you borrow it. Additionally, business lines of credit can be unsecured, meaning you don’t have to offer collateral to be approved for financing. However, this might mean higher interest rates than a secured line and a smaller credit line amount.
SBA Loans
If you’re looking to secure an SBA loan for your gas station, you’re in luck. The Small Business Administration (SBA) offers several funding products. If you’ve been denied for gas station financing with a conventional bank, you might find an SBA-insured loan a viable alternative. Why?
The SBA partners with lenders to guarantee a percentage of each loan, so lenders are less at risk of losing out if a borrower defaults. The maximum maturity of SBA loans is 10 years for equipment and working capital, and 25 years for real estate.
SBA 7(a)
If you’re looking for a loan to buy a gas station, consider the SBA 7(a). Borrowers can be approved for loans up to $5 million, and funds can be used for various purposes, including to:
- Purchase or expand a business
- Construct a commercial building
- Buy equipment
- Get working capital
- Make improvements to a leased property
Maximum gas station variable loan rates you’ll see with the 7(a) range from a base rate plus 2.25% to a base rate plus 4.75%, depending on the loan amount and repayment term. The base rate could be tied to the Prime Rate, which as of late October 2019 was 4.75%.
SBA Express
If your funding requirements don’t exceed $350,000 and you need fairly fast access to financing, an SBA Express loan might be the way to go. While interest rates might be higher, you could receive an answer from your lender within 3 days, and funding in 30 days. Repayment terms are either 5 or 10 years. Maximum interest rates for SBA Express loans range from Prime plus 4.5% to Prime plus 6.5%, depending on the total amount of the business loan for your gas station.
SBA 504/CDC
The SBA’s 504 loans are offered in conjunction with certified development companies (CDCs). How does it work? The borrower offers a down payment of at least 10%. A lender finances up to 50% of the project, and the CDC funds up to 40% (which is insured by the SBA, up to their maximum allowable limits). Loan amounts are unlimited. Repayment is either made in 10 or 20 years. Time to funding ranges from 60-180 days. While you can’t use funds for working capital, you can buy, renovate or build facilities, refinance certain debt and acquire machinery.
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Independent Gas Stations in the U.S.
According to a December 2018 survey by the National Association of Convenience Stores (NACS), roughly 62% of U.S. gas stations with convenience stores operate as independent businesses. Small business owners in the fuel industry often require an influx of cash to grow their business or get through low-performing times of the year, perhaps when gas costs rise.
Gas Station Equipment Loans
If you need funding just to obtain new equipment, consider equipment financing, which can be used to lease or purchase machinery. Equipment financing products are secured by the equipment you’re purchasing. As a result, this type of financing is considered less of a risk than a loan that’s unsecured.
Rates range depending on various factors, such as the lender, type and age of equipment and financing product. However, you might find gas station financing rates for equipment loans ranging from 8% to more than 20%.
Use equipment financing to purchase the following for your filling station:
- Gas station pumps
- Underground tanks
- Point-of-sale systems
- Car wash equipment
- Gas station signage
Where to Find Gas Station Loans
Gas station loans are available through banks as well as non-bank lenders. It’s widely stated, however, that obtaining gas station financing through conventional banks can be challenging. This is due to environmental concerns associated with filling stations as well as the lack of ability to accurately track cash flow due to the high cash-transaction nature of the business. As a result, you might have an easier time getting financing with an alternative lender.
Once you find a commercial gas station loan that interests you, estimate your monthly payments and total cost of financing by using a gas station loan calculator. With an online loan repayment calculator, simply input your loan amount, estimated interest rate and anticipated loan term. Use this tool to compare lender terms and see how much of a gas station loan you can afford.
