Starting and managing a gas station is a very capital-intensive business— you need a better amount of pumps, an expanded convenience store with a modernized outlook. Business loans for gas stations are the best asset; they can allow gas station proprietors to do all the needed changes in their gas stations like stocking the convenience store shelves or replace a pump and much more.
With alternative lending on the rise, there are numerous financing options available for gas stations. The qualification criteria depend on the borrower’s financial history, and the time in business. There are different kinds of business loans for gas stations, where some offer more flexibility and some quick funding.
Getting a business loan for gas stations can be difficult because of the specific nature of this industry. The choice of business lenders will be inadequate than with other business types. The business nature has apparent ecological hazards that are missing in many other commercial endeavors. A gas station is a necessity for the community and pairing yourself with the right funding option can help you serve the community best. Read on this article to learn about business loans for gas stations and tips to consider before choosing one.
Business Loans for Gas Stations
The first thing to know is that there are a variety of business loans available for gas stations. Before you make a loan application, you need to understand your financial condition, credit history, current cash flow, and your funding need.
How to Choose a Business Loan?
First things first understand a business loan structure. Some lenders provide flexibility in terms of how you can spend the money by providing you a lump sum cash. While others provide flexibility but don’t offer a lump sum amount, but relatively you can borrow as per your need. Some lenders provide financing for specific purposes like buying equipment. So, assess your need before you make a loan application for a business loan.
The next thing is the quick delivery of funding. Some lenders provide funding within a few hours while some take a bit more time. Therefore, understanding how fast you need money will help you evaluate your loan options.
Finally, the paying back of the borrowed amount. Some lenders provide funding with fixed monthly payments while some with repayments that are more frequent. Understanding your cash flow and affordability will help you pick the best business loan for your needs.
The Best Small Business Loans for Gas Stations
- Small Business Administration (SBA) Loans
Small Business Administration (SBA) has various loan programs for a gas station, an provide a high level of financing based on collateral. You can secure a business loan up to 90% of your collateral value as compared to 70% or less with traditional banks.
The only downside of SBA loans is that it takes a lot of time (90 days or more) to get the cash in hand. The reason is since the loan is backed by a government guarantee, they need to scrutinize the detailed documentation, credit history, business plan, financials, and business management ability for the approval process.
- Term Loans
Term loans provide a lump sum amount into your business bank account that you repay in fixed monthly payments. These loans are working capital loans and can be used for any business purpose like investments, purchases or for emergency repairs. Getting a term loan is easy with quick cash in hand just in a few days. The process for term loans involves little paperwork, easy qualification criteria, so you have quick access to the capital.
- Short-Term Loans
If you can’t qualify for a business term loan, a short-term loan can help. It is similar to medium-term loan, but with daily or monthly repayment and higher interest rates. The repayment terms are up to 18 months with less paperwork and qualification requirement and cash within the next business day.
- Business Lines of Credit
A business line of credit is another suitable option where you are approved for a credit line that you can borrow up to the top. The best thing about a credit line is that you used what you borrow instead of a lump sum amount of money in case of term loans. This means you don’t have to pay interest on the whole amount. You pay only on the amount you borrow. This can help your business with cash flow and saves you some money as well. You can use a business line of credit for payroll, supplies, utilities, etc. New businesses can also qualify for a business line of credit. But, good personal credit history is required if you don’t have a record of your business financials.
- Equipment Financing
Owning a gas station means you need big equipment—and your business can suffer if your pumps go down or need an upgrade. In equipment financing, you’ll provide a quote to a lender, which will finance you for up to 100% of the equipment. Equipment financing is different from equipment leasing since you own the equipment outright. This is based on self-collateralization that means the equipment will act as collateral for the loan itself, and, often, you don’t have to provide any collateral to avail it. This also helps startup entrepreneurs to get quick access to the needed capital to make major purchases.
- Business Credit Cards
Business credit cards also serve as a business loan option. Using a credit card sensibly can get you a lot of benefits. There are 0% introductory APR business credit card particularly for business owners to get quick access to the capital. These credit cards provide a long interest-free period in which you don’t have to pay any interest and can make purchases. Once the long interest-free period is over, you will be charged at a variable APR rate that will vary with the market prime rate. Therefore, before applying for a business credit card, make sure you read all the fine prints.
How to Apply for Business Loans for Gas Stations?
After reviewing all your business loan options, you’ll apply to a lender to get approval. Every lender has its own set of specific documentation and eligibility criteria. In order to get cash quickly, you need to get yourself prepared for your business loan application. The more prepared you are, the quicker you’re likely to get approved. The documents that most lenders require include the following:
- Bank Statements
- Business & Personal Tax Returns
- Proof of Business Registration
- Business Licenses and Permits
- Employer Identification Number (EIN)
- Financial Statements
- Proof of Collateral
- Business Plan
- 3 months of recent business bank statements
- Credit History
Finding the Best Business Loans for Gas Stations
After reading all the business loan types, we hope you’ll have enough information to decide which loan option will works best for your gas station. Keep in mind that just reading a list will not help you pick the best business loan for gas stations, but practically understanding what’s going to work for your business. Finding the best business loan for gas stations will not help you a lot but also save you some money.
Merchant Advisors has been serving the small business community over many years by providing Small Business Loans for Gas Stations & Convenience Stores. If you’re in need of quick funding, apply today for a FREE business funding quote!