Gas Station Financing: How to Fund Your Fuel Business

Securing the right financing is essential for gas station owners looking to purchase property, upgrade equipment, or maintain working capital. With startup costs often exceeding several million dollars and equipment requiring regular replacement, understanding your funding options helps you make informed decisions for your business. Read this guide to learn about the best gas station financing options, qualification requirements, and strategies to secure funding.

Key takeaways:

• SBA 7(a) and 504 loans offer long-term, low-rate financing ideal for gas station purchases, construction, and equipment.

• Traditional bank loans provide competitive rates but require strong credit, financials, and environmental compliance.

• Equipment financing helps cover pumps, tanks, and POS systems with faster approvals and collateral-based terms.

• Alternative financing options like merchant cash advances and business lines of credit offer quick access to capital but higher costs.

• Borrowers with solid credit, industry experience, and clean environmental records qualify for the best rates and terms.

How much does gas station financing cost?

Gas station financing costs vary significantly based on the loan type, lender, \your business profile, and--yes--your credit score. It’s important to understand the different loan products and options out there so that you can make the wisest choice for your venture.

When you’re opening a small business, one of the first places you might want to look for financing is the  U.S. Small Business Administration (SBA). The SBA 7(a) loan program is their primary business loan program for providing financial assistance to small businesses. SBA 7(a) loan interest rates are negotiated between borrowers and lenders but are subject to SBA maximums pegged to the prime rate.  

A commercial loan is debt-based financing that’s used to fund business expenses, like purchasing equipment or real estate. With a commercial loan, you borrow capital from a financial institution, such as a bank, credit union or private lender, and you repay it over time. While the SBA loan is a kind of commercial loan, it’s not considered a traditional or conventional loan. This is because the SBA loans come with a government guarantee, which results in more favorable loan terms like lower interest rates and smaller down payments. 

The cash for conventional commercial loans comes directly from a private lender (think credit unions, banks, etc.).  Traditional bank loans generally offer the most competitive rates but require excellent credit and extensive documentation. Down payments vary by loan type and property classification, with standard properties requiring 10% down while special-use properties like gas stations need 15%.  Commercial mortgage rates remain competitive despite recent Federal Reserve adjustments at the time of this article’s publication.

Equipment financing typically offers fixed rates for terms ranging from 24 to 84 months, with the equipment itself serving as collateral. Alternative financing options like merchant cash advances use factor rates instead of traditional interest, with factor rates as low as 1.09 and as high as 1.5, translating to effective APRs that can reach significantly higher levels depending on repayment speed.

SBA loan programs for gas stations

The Small Business Administration offers two primary loan programs well-suited for gas station financing, each designed for different business needs.

SBA 7(a) loans

SBA 7(a) loans have a maximum loan amount of $5 million for most programs, making them ideal for business acquisitions, working capital, and equipment purchases. These loans can finance new construction, including pumps, underground tanks, POS systems, and parking lots. The SBA guarantees up to 85% of loans under $150,000 and up to 75% of loans above that amount, reducing lender risk.

To qualify for an SBA 7(a) loan, you must demonstrate that cash flow can cover both the loan and an owner's salary. The SBA has begun emphasizing prior experience of the borrower, so if you're not an experienced gas station owner, you'll most likely need a partner with direct management experience or retain the previous owner as manager.

SBA 504 loans

The SBA 504 loan program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation, with a maximum loan amount of $5.5 million. The program structures financing in three parts: a conventional lender provides 50%, the SBA covers 35% through a Certified Development Company, and the borrower contributes 15% as a down payment for special-use properties like gas stations.

To be eligible, your business must have a tangible net worth of less than $20 million and an average net income of less than $6.5 million after federal income taxes for the two years preceding your application. The 504 program requires businesses to meet job creation requirements or community development goals.

Gas stations classified as special-purpose properties benefit from below-market fixed interest rates and repayment terms extending up to 25 years.

Equipment financing options

Gas station equipment financing allows owners to acquire essential equipment without depleting working capital. This financing type uses the equipment as collateral, making it more accessible than unsecured loans. Because the equipment serves as collateral, lenders can offer more favorable terms compared to unsecured financing.

Equipment financing covers:

• fuel dispensers

• underground storage tanks

• POS systems

• cold storage units

• LED lighting

• other convenience store equipment. 

The financing process begins by identifying needed equipment and obtaining quotes from suppliers. Compare lenders carefully, as terms, interest rates, and approval criteria vary significantly. Standard documents include business tax returns, bank statements, equipment invoices, and proof of business location ownership or lease.

Patriot Capital and similar specialized lenders offer below-market fixed interest rates with 100% project financing and can provide approval and funding within 24 hours. These lenders understand the unique needs of gas station operators and offer flexible payment structures aligned with business cash flow.

Traditional bank and commercial loans

Traditional bank loans remain a primary financing source for gas station owners with strong credit profiles and established businesses. These loans typically require three years of financial statements, excellent credit scores, and substantial documentation including tax returns, income statements, balance sheets, and personal financial statements.

Gas station financing for commercial real estate includes bank loans offering LTVs up to 90% and amortizations of up to 30 years. Commercial lenders evaluate property location, financial stability, and traffic patterns when determining loan terms.

Banks provide competitive rates but maintain strict approval standards due to perceived risks associated with gas stations, including cash-heavy transactions, thin profit margins, and environmental concerns. Properties in high-traffic areas with steady customer streams typically receive more favorable terms than locations in less-trafficked areas.

Alternative financing solutions

Alternative lenders provide options for gas station owners who cannot qualify for traditional financing or need faster access to capital.

Merchant cash advances

Merchant cash advances provide upfront capital in exchange for a percentage of future credit card sales. Businesses averaging a minimum of $7,500 per month in sales over the last three months typically qualify for an MCA equal to 70-120% in funding, from as little as $3,000 up to $500,000.

Alternative lenders like Greenbox Capital focus on overall business health rather than just credit scores, with approval and funding often available within 24 hours. Payments are automatically deducted from daily or weekly credit card sales, aligning with business revenue.

Business lines of credit

Business lines of credit provide flexible access to capital up to a set limit. You only pay interest when you draw funds, making this option ideal for managing seasonal fluctuations and unexpected expenses. Lines of credit work similarly to credit cards but often offer higher limits and lower rates than unsecured options.

Seller financing

Seller financing occurs when the current business owner agrees to finance part of the purchase price, allowing buyers to make a cash down payment and pay the remainder in installments. This option can be particularly valuable when traditional financing proves difficult to obtain.

Other kinds of alternative financing

Hard money loans, also known as asset-based loans, provide alternative pathways to securing necessary funds. Lenders are usually private investors who offer short loan terms with high rates and high fees. This pathway to funding considers the real estate or collateral at hand over credit scores, which may sound appealing to borrowers with poor or bruised credit. However, hard money loans come with a high risk factor for borrowers, including the potential for foreclosure and financial loss if the borrower defaults on the loan.  

Key qualification requirements

Lenders evaluate several factors when considering gas station financing applications:

1. Credit and financial history

Strong personal and business credit scores significantly improve approval chances and interest rates. Most SBA loans require credit scores of 650 or higher, while alternative lenders may accept scores as low as 550.

2. Business experience

A track record of success goes a long way when it comes to securing a loan. Prior gas station or convenience store management experience weighs heavily in approval decisions. It’s also worth noting that franchise businesses often receive more favorable consideration thanks to  established brand support and proven business models.

3. Cash flow and revenue

Your business must demonstrate ability to service debt from operating revenue. Lenders analyze revenue trends, profit margins, and projected cash flow to assess repayment capacity.

4. Environmental compliance

Because of factors like fuel storage and potential contamination risks, gas stations face heightened environmental scrutiny.Lenders typically require environmental investigations before approval to identify existing liabilities.

5. Down payment capacity

Most programs require 10-20% down payments depending on loan type and borrower status. New businesses or special-use properties face higher down payment requirements.

Environmental considerations

As mentioned earlier, environmental factors significantly impact gas station financing. Lenders require Phase I--and sometimes Phase II--environmental assessments to identify potential contamination from underground storage tanks, fuel spills, or historical operations.

In fact, environmental insurance and compliance with EPA regulations are mandatory for most financing arrangements. With that in mind, budget for ongoing environmental monitoring, tank testing, and potential remediation costs when planning your financing needs.

Documentation requirements

Prepare comprehensive documentation to streamline the approval process:

• Three years of business and personal tax returns

• Current financial statements including balance sheets and income statements

• Personal financial statements for all owners

• Business plan with financial projections

• Business and personal bank statements (typically 3-6 months)

• Equipment quotes or invoices

• Property appraisal and environmental reports

• Proof of business registration and licenses

• Franchise agreements (if applicable)

Working with experienced business loan brokers who understand gas station financing can prevent delays and identify potential issues before they become obstacles.

Application process and timeline

SBA loan applications typically take 60-90 days from application to funding due to government underwriting requirements and documentation review. Traditional bank loans follow similar timelines, requiring extensive financial analysis and approval through multiple committees.

Equipment financing and alternative lending options move much faster, with approvals often within 24-48 hours and funding available within one week. This speed comes with trade-offs in terms and rates but provides valuable flexibility for time-sensitive needs.

Frequently asked questions

Can I get gas station financing with bad credit? 

Yes, alternative lenders and some equipment financing options accept lower credit scores, though you'll face higher rates. Building business credit and demonstrating strong revenue can improve your options over time.

What's the minimum down payment for a gas station purchase? 

Down payments start at 10% for standard properties, but gas stations as special-use properties typically require 15% down, and new businesses purchasing special-use properties need 20% down.

How long does SBA loan approval take? 

SBA loans typically require 60-90 days from application to funding, though some lenders with streamlined processes can move faster once all documentation is complete.

Do I need gas station experience to qualify for financing? 

While not always required, relevant industry experience significantly improves approval chances and may be necessary for SBA loans. Partners with experience or retaining previous owners can help satisfy this requirement.

What are the biggest challenges in securing gas station financing? 

Environmental concerns, cash-heavy business models, and the special-use classification of gas stations make them higher-risk for traditional lenders. Strong financials, industry experience, and prime locations help overcome these challenges.