Gas stations are a vital part of the economy, assisting thousands of motorists in getting where they want to go daily. However, even gas stations need someone to stand with them whenever they want to start up, expand, or grow. If you wish to refinance your gas station or obtain a new gas station, Money Lender Loans has you covered. For many years, we have offered eligible entrepreneurs in Orange County different types of loans, and we invite you to explore our different loan options for a gas station.
Commercial and Industrial Loans for Gas Stations
Great ideas to grow or start a gas station need commercial and industrial loans (C&I loans) for funding. C&I loans are designed for businesses, and they require collateral.
The American Banker argues that funding is essential for small companies that are not able to fund businesses by giving out stocks or bonds. Because these loans are short-term, they are mainly used for purchasing equipment for expansion or start-up or as working capital.
Common Reasons for Financing a Gas Station
Like any business, there are always hard times with unanticipated emergencies. That is why going through common reasons why most entrepreneurs look for different types of financing options can assist your business run smoothly throughout those unexpected times.
- Credit Card Fees
Debit card and credit card charges are high in the industry. For instance, the industry paid approximately $10 billion in debit card and credit card charges in 2015 alone. Nevertheless, the business owners can't remove the option to pay using debit and credit cards since most consumers demand to pay for goods without cash. This almost inevitable in the U.S today; therefore, putting various financing options into consideration can be useful as far as paying these charges is concerned.
- Equipment
Adequate tools are always required in the gas stations, but replacing or upgrading the tools can be extremely expensive. Luckily, there are several equipment financing options available to you when it comes to replacing broken or old equipment.
- Payroll
Although payroll is one of the inevitable costs in this industry, that doesn't mean that every business owner can afford to meet the expenses during slow periods. You need gas station loans to help push through such periods.
- Marketing
Social media and Mobile gas stations use aren't new developments in the gas station industry. However, not all business owners have embraced these technological advancements. As a gas station business owner, you need to begin making a transition into the technology generation. Otherwise, consumers, mainly the younger generation, will only use gas stations that meet their needs.
Knowing what the best technologies are and implementing them effectively can be complicated and confusing. So, hiring professionals to assist you with this transition will be helpful. Well, this isn't a pocket-friendly option. Consequently, you need to consider a gas station loan during the transition.
- Insurance
Insurance is a must-have in any industry because of the number of robberies that take place. If your business is not covered, you could be required to pay more later on when it comes to replacing the stolen equipment. Talk to your money lending company to help you get the suitable financing option to cover these expenses.
- Renovations and Expansion
Renovations and expansion are always things to put into account even when your business is doing well. Most entrepreneurs hope to open several locations, particularly in busy areas such as Orange County, California, but the upfront expenses of expansions are costly. Considering various types of gas station loans will be helpful.
- Going Green
Being environmental-conscious is something that interests most people. So it makes sense assuming that your gas station will be providing alternative fuel to the customer base. Nonetheless, this move is not pocket-friendly - this is why the reason for accessing loans and financing is crucial to this industry.
- Mergers and Acquisitions
You may want to combine your gas station with your supplier or competitor to form a joint enterprise, and a gas station loan would play a key role in this merger or acquisition.
What You Need to Obtain a Commercial and Industrial Loan for Your Gas Station
Various things will determine your eligibility for a C&I Loan, as explained below.
Collateral
Collateral is an asset that you are willing to put up to secure your loan. If you're purchasing a property, vehicle, or equipment, the asset is considered security.
Personal Guarantees
In case your gas station is a start-up, chances are you don't have collateral. Although it is hard to obtain a commercial and industrial loan without security, you may be lucky to get a lending institution that accepts personal guarantee. In this case, you will be required to pledge personal properties.
Cosigner
If everything fails, you can find a person who will cosign the loan. The cosigner will be required to use their business or personal assets as security.
Documents
You will require a business plan demonstrating the total amount of money you need, how it will be utilized, and how you will repay it. Additionally, you will be required to show your previous gas station performance and tax returns for a couple of years.
Different Types of Gas Station Loans: What are Your Options?
A gas station business is a lucrative business to venture into, but it requires huge sums of money to build an authentic brand from scratch or purchase one. Other reasons that make many people who could be interested in venturing into this business shy away from include:
- Accounting problems, especially tracking cash flow when a huge amount of turnover in the form of cash is involved
- Another challenge faced by gas station owners is leaky tanks and costly cleanup. This is not something any lender is ready to share in
- Gas stations are hard to convert to any other use, hence making them difficult to sell and crediting risk
Fortunately, this should not discourage you because there are numerous gas stations financing options to any eligible business owner.
Commercial Real Estate
Also referred to as CRE, commercial real estate loans are designed for buying business real estate. They are long-term loans that use the property as collateral. CRE loans are equivalent to the mortgage loan for real estate.
A Credit Line
A credit line involves putting money in your gas station bank account, and the benefit is that you pay only the interest on the money you receive. Depending on the circumstances, this business loan can be unsecured or secured. Unsecured loans have a high-interest rate.
Factoring
Factoring is getting money through accounts receivable as security. Although the receivables are discounted, you might get funding quickly.
SBA Commercial and Industrial Loans
Although the Small Business Administration (SBA) does not give businesses loans directly, you could be in a position to obtain SBA help with a commercial and industrial loan. You could think through one of the following SBA loans:
- Basic 7 (a) Loan Guaranty SBA Loans
A basic 7 (a) Loan Guaranty SBA Loan is what comes to mind when you think about SBA loans. It is the main loan program Small Business Administration offers eligible small business owners. It helps them acquire loans that they couldn't otherwise qualify for via the standard lending methods without a government guarantee.
Moreover, it is a flexible SBA loan since it can be secured for numerous business purposes such as working capital, equipment, refinancing previous debt, and land. The maturity period for fixed asset financing and working capital is twenty-five years and ten years, respectively.
Basic 7 (a) Loan SBA Loans are available to both existing small companies and start-up firms via commercial lending institutions. Your gas station will be eligible for this type of loan as long as it:
- Intends to make profit
- Is planned to operate in the U.S
- Has owner equity of its own to invest in the gas station
- Has explored other funding methods like personal assets first
- Certified Development Company (CDC) 504 SBA Loans
CDC loans offer long term fixed-rate financing to businesses that intend to acquire machinery, real estate, or tools for modernization or expansion. The funding comes in three parts that are facilitated by CDC, borrower, and a conventional lender. Here is the break down in terms of percentage:
- Fifty percent of the total loan will come from your lender. It is your responsibility to negotiate with the lender to determine the conditions and terms of your loan.
- The CDC facilitates thirty-five percent of the total amount, up to five million USD for ten to twenty years at a fixed market rate. You can also get up to $5.5 million if your gas station qualifies for SBA Green Energy Program.
- Finally, you will contribute fifteen percent of the loan. This is a down-payment requirement on an SBA 504 loan for your gas station.
Usually, SBA 504 funding is designed for small businesses that require financing for physical plants or brick or mortar stores such as gas stations.
Your gas station should be run with an intention to make profits to qualify for these loans. It should also not have a real net worth that exceeds $7.5 million or $2,500,000 after deducting taxes for the prior two years.
- Prequalification Program for Small Business Administration Loans
The SBA loan in question will permit you to have your loan application for a maximum of $250,000 evaluated by SBA before applying to your lender. Since these loans are hard securing, the advantage of this loan program is that it's designed to assist you to prepare your loan application in detail for consideration by your lender.
SBA loan prequalification concentrates on your credit, reliability, experience, and character. The review is established on major financial ratios, terms of loan requested, and business and credit history.
An intermediary will work with you to review, analyze, and strengthen your loan application.
Tips on How to Get the Best Commercial and Industrial Loan
Not all lending institutions operate in the same way, but most of them will pay attention to common areas throughout the review process. Understanding what projections, narratives, and documentation you need to prepare will help you negotiate the best loan package. Discussed below are the tips that will help you get the best financing:
Start Before You Need the Loan
It is essential to have a healthy relationship with your lender before your gas station needs financing. Let the paramount contacts know your business before requesting anything. People transact business with those they know, trust, and like. Lenders operate in the same manner.
Decide How You will Utilize the Money
There are both beneficial and wrong reasons for commercial and industrial gas station loans. Common beneficial reasons include real estate, software development, and financing equipment. Wrong reasons, on the other hand, may include getting a non-essential asset, office build-out, and putting money into ongoing losses.
Determine How Much the Business Requires
If your business is small, do not request for a huge loan. Underestimating the money you require could result in a lack of enough working capital. Overstating could make the lender question your credibility and assumptions.
Make sure you prepare a budget that has reasonable financial projections such as cash flow statement and profit and loss statement. Also, it demonstrates that research was conducted.
Know Your Score
It is essential to note that all lenders will look at your personal credit score when judging your reliability. Common areas considered include:
- Credit score
A score that is between 650 and 700 is acceptable, but cannot guarantee a loan. Lenders look for scores that are above 700.
- Debt-income
Your personal debt payment shouldn't be above thirty-three percent of your monthly gross income.
- Time in business
A lender will give you an unsecured loan if your gas station has been in business for more than two years and have an incoming accounts receivables record.
- Cash flow report
The higher your operating cash margin, the increased chances of your business to grow and endure slow market conditions. A lender will give a loan based on your gas station's cash flow since it tells a lot about your capability to repay your loan successfully.
Prepare your Loan Application Package
This entails the necessary paperwork submitted when applying for a loan. Generally, it includes:
- Your business plan together with your resumes
- Financial projections and results
- Personal financial details including your tax returns
- Proof of citizenship
- Credit reports of the gas station and all business partners
- State certification
Notably, your lender will search your social media platforms as part of their research.
Wait
Expect to hear from the leading institution within two (2) to four (4) weeks. Check-in every week for an update to see if the lender requires additional documentation.
Steps in the Loan Process
When you submit a gas station loan application, it could look like it has disappeared into a black hole. Understanding how the commercial and industrial loans process will help reduce anxiety as you await approval.
Your lender will pre-qualify you to know how much you can afford. This will let you and the lending institution see which program meets your needs. The agent will also collect your basic information like existing debts and income.
To start the loan process, you should complete and then submit your loan application. After submitting, a loan processor or officer will review your available collateral, income, personal financial statements, and credit reports. The officer will also determine if there are additional documents required.
Once your paperwork is approved, the application will be forwarded to an underwriter or loan committee. The loan process will also send you a term sheet or letter of intent. This is an official document whose purpose is to make sure all parties are in agreement. The letter of intent will contain elements such as the names of parties involved, the collateral used, and the amount financed. The decision to grant or deny the commercial and industrial loan takes approximately five days. During this process, you could be required to present more documentation.
After submitting the letter of intent, the lender may ask for a check intended to cover the costs of making essential reports for the loan approval process or act as a deposit.
The entire loan application package is then submitted to the loan committee for approval. If the commercial and industrial loan is approved, you will sign the closing loan documents. If you have a closing agent like an escrow representative or attorney, the final documents will be sent to them. The agent should file as well as complete the remaining paperwork.
Generally, the closing will happen within a couple of days after the final approval. The lender will provide you with the loan by direct transfer to your bank account or through check.
Find A Reliable Lender Near Me
Small businesses, including gas stations, are the backbone of the U.S economy. Commercial and industrial loans offer a wide range of options to address the common challenges that these businesses face. Once you have prepared the necessary documents for your loan package, it is time to contact a reliable lender. If you are in Orange County, please get in touch with Money Lender Loans at 949-409-4372. We will not only offer you professional advice but also assist you to obtain the best type of loan as you begin building your gas station business. Get in touch today to begin your loan application process.
