Quick Business Loans for Gas Stations

An article by Wayne Jordan    1 Comment

The Challenges of Owning a Gas Station

Oil is in the news and on everyone’s mind.  Whether the news is about the latest oil spill or the cost of a barrel, everyone is talking about oil.

What most folks don’t realize is that although the cost of a gallon of gas is continually on the rise, very little of that money goes to the owner of a gas station; most of the money goes to the wholesale cost of the gas and to state and local taxes.  Gasoline is the magnet that attracts consumers to the gas station, but once there, the business owner hopes to sell the consumer something other than gas.

Profits Are In Retail

In the past couple of decades gas stations have shifted away from traditional services like auto repairs and towing.  The trend has been to convert service bays into retail space.  Gas stations have become convenience stores, and are offering coffee, sandwiches, sodas, cigarettes, candy and more.  Retail is where the profits are; a gas station makes as much profit on a super-sized cup of coffee as they do on a tank full of gas.  

Store Traffic Drives Sales

In order to make retail sales, a gas station needs lots of people walking through the door.  When the weather is bad, or when the price of a gallon of gas goes through the roof, store traffic slows down; and when it does, retail sales suffer.  When retail sales suffer, cash flow and profits suffer and the business has a hard time paying its bills.

Bank Credit Isn’t Available

Banks hate to loan money to gas stations; they see the risks as too great.  Here’s how a bank see a gas station:

• Gas stations are a cash business.  Verifying cash flow for a gas station is harder than for commercial rental properties. 
• Gas stations have perceived environmental risks and the liability associated with such risks.
• Because banks don’t know anything about running a gas station, they are unable to run the station if they have to foreclose on the loan.  All they can do is sit there and accumulate losses while they wait for a buyer.

A Merchant Account Is an Ace-In-The-Hole

Most purchases at a gas station convenience store are paid for with a credit card.  Gas stations generally have a very active merchant account.  Since credit card sales are frequent and somewhat predictable, gas station owners can get an advance against future credit card sales whenever they get into a cash crunch.

Easy to Qualify

Unlike a bank loan, a merchant cash advance is easy to qualify for.  The requirements are:

• $2,500 minimum in credit card sales per month
• 4 months as the current business owner
• Be current on the property lease
• Have a FICO score of at least 500 (better credit = more funds and lower rates)

Re-paying a merchant cash advance is easy as well:

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up. 
• No fixed repayment term
• No collateral
• Approval not based on your credit score

With a merchant cash advance, gas station owners will be able to continue to make their payroll and cover their expenses when there is a temporary downturn in business.  A merchant cash advance is a valuable financial tool for gas station owners.