Financing gas stations are difficult, complicated and subsequently most conventional banks and lenders don’t consider financing a gas station or convenience store properties. Why?
1)Gas stations, convenience store and car wash business is a “cash business” and no business owner would declare the cash in the tax returns. Therefore, it is impossible to verify cash flow and determine the debt to service ratio for the loan
2)Gas station properties have environmental risks. The ones that are clean have a higher risk of environmental problems in future
3)If the lenders take over the gas station properties through foreclosure, they are not able to run the business. Unlike income producing properties such as apartment buildings, the lenders can’t get a property manager to manage the gas station.
4)There are other issues such as low fuel margins, restrict dealer or franchise contract that makes the lender uncomfortable in evaluating gas station financing
There are few lenders that would consider financing gas stations and they mostly use SBA loans to finance the property since the federal government guarantees major portion of the loan. Even with the government guarantee, the lenders are very conservative in underwriting the transaction. To be honest with you, if you have found a gas station property to purchase, financing is possible but would be a pain so be ready.
There are niche lenders specializing in gas stations and convenience store financing [http://easysbaloan.com/small-business-loan-programs/special-purpose-lending/convenient-store-commercial-property-loans-financing/].
Some would go as high as 80% loan to value of the property and they use the real estate, business and equipments as collateral in underwriting the property. Underwriter looks at the tax returns, income statements and sponsors’ credit and experience to analyze the credit worthiness of the transaction.