Gas Station Loans Have Gotten the Worst of It

Many businessmen that are looking to either refinance their gas station loan or purchase a new facility are now facing serious challenges with securing capital. And similar to the bride that leaves you at the altar, the SBA has all but pulled out of this sector that prior too was the back bone loan to the industry. At the end of the day you could normally rely on the SBA loans to get something done.

Now this isn’t to say that the SBA has pulled out completely, they’ve just made it so cumbersome and expensive on the front end for the borrower that, for many it’s just not worth it. Take for example, that all deals have to have a full phase two completed, no matter the age.

Say the property is a 2 years old, with state of the art tanks and equipment it doesn’t matter. They want a full phase 2 which runs the borrower at least $10,000. If any issues (or hints of issues) are discovered, the costs can easily exceed $100,000 for clean up, legal fees, consulting fees, etc.

Local and regional banks normally either have an appetite for this industry or not. Due to the complexity of the deals, banks just don’t dabble in this sector. What we’re seeing is that many established players have or are pulling out of gas station funding. They’re shifting their focus to more general properties like office, retail etc, or just waiting to see what happens with Wall Street before they throw any more cash around.

Where’s the happy ending in the commercial mortgage industry? There are still a few portfolio lenders (and SBA lenders) that have an established niche and continue on. Borrowers should be spending their time trying to figure out if the bank they are working with is really going to fund their deal, rather than trying to save a few basis points on rates. The question isn’t what’s your rates, its are your going to waste 3 months of my time and $10,000?

Put your detective hat on and dig deep. Figure out if the bank in questions is really serious about the project. Question like “how many gas station loans have you closed year to date? What is your personal outlook on the stability of the bank? What’s the banks history with gas stations loans?” Remember that the bank representative has quotas like, filled out application per week, phone calls per day, meeting per week, etc. So even if the bank loan officer doesn’t really think he can get it done he may waste your time, to protect his job.

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