Financing Gas Stations And Convenience Stores In The 21st Century, What To Expect

What to expect when you apply for a loan. Most borrowers for commercial loans associate their loan with a residential loan process. Residential loans are fairly simple in comparison. Commercial lenders are much more rigid in their underwriting practices.

When a person 'borrows' money, he becomes a slave to the lender. All mortgages contain covenants and restrictions and place liens against the property so that the lender can confiscate the property if the borrower defaults. With that said, mortgages can, and do work for the benefit of the borrower. However, it must be understood that the more conditions that are placed in the loan, the higher the risk is to the borrower. For example balloon payments.

Many commercial loans will offer a payment schedule that is either interest only over a certain period of time, or it can be amortized over 20 years, but the balloon provision requires that the loan is fully due and payable in five years. The borrower must have one understanding about borrowing, and that is that time is either his greatest enemy or his greatest friend. Balloon payments almost always put time in favor of the lender because the borrower cannot predict future business pitfalls or the state of the local or national economy that will be in place at the time the balloon comes due. The lender has no such problem because if the economy is bad, the lender gets the property at a large discount. If the economy is good, the lender gets repaid with interest.

Interest rates can also work against the borrower. The higher the interest rate, the less profits available for loan repayments and other expenses. The gas station owner must be very frugal in weighing the pitfalls associated with the loan being offered. Not all loans, or lenders, are the same. There are many un-reputable lenders that misrepresent the provisions of the loan process. In all cases let the borrower be alert.

The benefits of borrowing

As explained above, there are many pitfalls in borrowing money against a business or property. However, for the prudent borrower, a mortgage can be very beneficial. Borrowing can create opportunities of purchasing a new or additional gas station so that you can offer a service in exchange for profits. Borrowing will allow you to expand the service you offer in your gas station and convenience store so that you can increase your income and be more profitable.

As you can see, there are pluses and minuses that come into play when borrowing. The borrower must never lose sight of the downside of borrowing for his gas station business. While there is a great potential of profits based on volume, there is also the great potential for lose because of the high cost of inventory. If the gas station owner pays out $3.00 for a gallon of gas and expects only 12 cents in return, he needs to make sure that he has as many advantages working for him, and very few pressures coming from the lender.

MOST of all, make sure that you work with someone that is helping you achieve your goal of financing. Work with a broker that has many resources verses a bank that has only their in-house underwriters that may or may not decline your loan after you have spent two months of waiting. Borrowing money for your gas station business is a very personal experience and if you take the time to work with someone you trust, it can be a pleasant experience.