• Credit
• Cash Flow
• Collateral
• Conditions
• Capacity

We could take each one of these criteria and discuss them, but we will focus in on some of the more important issues for those obtaining financing. 

Collateral has become more of a hot spot for many lenders today. Most lenders will discount an appraisal 20-25% on the actual real estate value, 50% on the machinery and equipment and frequently up to 90% of the business good will.  Let’s assume you’re purchasing a convenience store with real estate for $1,000,000 and you are looking to put a $200,000 down payment towards the purchase. You may have an appraisal on the property indicating a $1,000,000 value, but the bank is looking at it as a $700,000 property on a liquidated basis and looking to you, the borrower, for additional collateral. (You can pick your jaw up now)  Does this somehow seem unfair to you?

It gets worse!! (It's ok, we've got you covered)

Let’s say you took out a home equity line from you house as part of your $200,000 down payment.   You’re thinking “My lender will like this because it’s my own hard earned money” WRONG. Even though you DID pay the principal on the house down, your friendly lender looks at it as another loan (which technically it is) so they have to factor paying back THAT loan also in the approval process.

Unfortunately, it still gets worse!!!  (We STILL have you covered)

The fact also remains that many borrowers will borrower the money from friends, relatives, former associates and “people that love them” to come up with their equity.  Tsk Tsk Tsk. Your banker doesn’t like that either, because if it isn’t your “own” money into the deal, it’s much easier to walk way from the business. (Which is true by the way)

To complicate matters, the lending community has a very “monkey see, monkey do” mentality when it comes to defaults and environmental issues.   If they heard about a gas station that had a huge spill and a bank had to pay for the cleanup, it sends ripples of fear into the banking community, because they think that might happen to a property in their portfolio. The fact is, their fears are frequently overrated and unfounded based on a lack of understanding of the system.  The fact is that when either leakage or spillage occurs on a site, the average cleanup is less than $50,000. The fact is almost all States have very healthy LUST funds or funds allocated for cleanup in the case where insurance falls short at the time of the leakage or spillage. The fact is that most cleanups do not even require a gas station or convenience store to close down for a site to be remediated.

We really could go on and on about the challenges that people face in financing their locations.  Suffice it to say that they exist.  What should you as a borrower look for and expect from the people looking to procure financing for you?

First of all, an absolute thorough understanding of petroleum retail AND commercial financing is an absolute necessity.  If you needed heart surgery, would your first preference be a physician who is a general practitioner? If you needed a root canal, would you prefer someone who specializes in root canals and does them DAILY or someone who did all types of general dentistry? Don’t you find it ironic that we might insist on a specialist for a root canal that costs $1,000, yet we’ll deal with a generalist when it comes to financing our commercial property that might be in the millions of dollars?

If you really want to have someone do your financing for you, why not administer them a test and gauge their knowledge of the industry? (Be prepared to have some embarrassed bankers).  Click this link and if they can’t pass this twenty question test with a 70% passing rate, do you REALLY want to trust them with your loan? (By the way, we’re dumb as rocks if we had to pass a test on restaurant or hotel or apartment financing…. we could care less about them….so nothing against bankers)

Specialists will almost always outperform generalists in anything in life.  

Second, deal with someone that offers multiple options for financing as well as the ability to do financing for unique situations.  Loans can be declined by some lenders and accepted by others for simple reasons as: 

• Age of property
• Average Monthly Gallonage
• TYPE of underground storage tanks
• AGE of underground storage tanks
• Only offering fuel and little or no inside sales
• Only offering fuel and repairs
• Unbranded or independent station
• No Card Readers at facility
• Land Leases
• Sites that have been remediated and await a No Further Action letter.
• Sites that have been remediated and have an indemnification agreement from a MAJOR OIL COMPANY
• No Financials
• Lite Financials

Crazy, huh?

And this is just about the FACILITY , much less the credit or experience of the borrower, how the property cash flows or other important factors. The list is actually MUCH longer than this.  You should INSIST that the company you deal with offer multiple types of financing, such as SBA, conventional, short term, stated income, hard money.

Third, deal with people that can offer or find options for finding additional capital into the transaction.  Whether that is a seller held second, equity provided by a fuel supplier, joint ventures, mezzanine financing, among others, the large real estate moguls of the world look for creative financing, why shouldn’t YOU?

Fourth, when looking for a company to do your financing, make sure that THEY that deal with OTHER companies that specialize in this industry also.   There are petroleum attorneys, insurance companies, accountants, contractors and vendors that deal exclusively or have a high degree of specialization in petroleum retail.   You as the borrower should deal with companies that not only can provide the financing for you, but also provided value added products and services to make you more profitable.

Fifth, when looking for your loan, deal with people that know the difference between cost of money and return on investment and not just the cheapest rate and the lowest points on a deal.   Again, your calculator will NEVER lie to you.  Frequently the cheapest rate or the lowest points is NOT the best deal.

Sixth, deal with companies that are active in the respective industry organizations so that they are up to date with the latest trends, technologies, etc.

Uncle, Uncle...we surrender! We Get The Idea….We'll apply for a loan here!

So Who Is This PetroMAC And What Makes THEM So Good?

Above all else, we have a clue when it comes to financing petroleum retail properties.

First, it’s all we do.  We actually really really LIKE gas stations! (Don’t get me going about our collection of gas station collectibles!). In our network of loan officers, underwriters, processors and consultants, hundreds of millions of dollars of C&G loans have been originated and closed.  We even have people in the organization that own gas stations, so how much more first hand experience could you want? I can promise you, all of those associated with PetroMAC know more about petroleum retail and financing these properties than 98% of the people you’ll ever deal with. (Including the people at Ever-So-Peachy Bank)

Second, if you can think of an option for financing or a unique situation, we’ve probably been there, done that, closed the loan.  We act as a correspondent and retail outlet for many large lending institutions, insurance companies and hedge funds (most of which you can’t approach directly). This allows us to negotiate a better deal for you because of our volume of business.  We do not function as a “broker” in the truest sense of the word, because you will not frequently see from us indicating compensation at the closing of the loan.  We offer Conventional Financing (with the newly introduced fixed rate financing program ), SBA 7(a), SBA 504, Stated Income Financing  (Newly Revised!), Business Only Financing , Investor Owned Property Financing , Hard Money Financing among other options. Our new Short Term/Bridge Financing with up to 100% financing is the most aggressive financing in the industry.  Some of the “unique” circumstances we have facilitated financing:

Third, we have the ability to engage other parties with an economic interest in petroleum retail to team with our borrowers to bring a loan to its fruition.  Whether that be a petroleum supplier providing equity and/or equipment into a transaction, parties interested in doing joint ventures with borrowers or lenders providing mezzanine financing to make sure that “make sense” deals get done.  Too many good deals with good borrowers are being overlooked because it does not fit in many lender’s “box.”  Molds are for concrete and jello.  We look for conventional and unconventional means to get these transactions done. Count on years of expertise and creativity to provide solutions to your unique needs.

Fourth, we ONLY deal with companies that specialize in doing petroleum retail, from appraisers, environmental companies, attorneys, insurance companies, vendors, construction companies, among others. We find these alliances to be synergistic. It’s has to do with who can perform the best for the borrower in all situations.  They might not necessarily be the cheapest in all situations, but to quote a famous sales person “Why settle for the get-by, when in the long run, the good always cost less.”  Their price may be a little more, but their cost is always less. Hear short presentations from industry professionals about:

Ø       Why are gas station/C-store appraisals different than other commercial properties.

Ø       Cut through the hoopla and find out what's important in an environmental.

Ø       Why not use just any old accountant to do your taxes?

Ø       Why do you need an insurance specialist for your business/property?

Fifth, we have a lot of different options to provide you with the lowest cost of capital. Again, the lowest rate and the cheapest points are frequently not your best option.

Sixth, we are active in the organizations that assist petroleum marketers in all facets of their business. This helps us help you by keeping you advised and updated on industry trends. 

We hate to disappoint you, but we don't get all deals done.    Frequently the speed of loan approval is in direct proportion to the organization (or lack thereof) of the borrower or broker.  Some borrowers omit telling us facts that they feel are not pertinent. Trust me, we will find out and they ARE pertinent.  It's the honesty as opposed to full disclosure approach. Because of the nature of the industry, environmental issues will be discovered from time to time.  It is EXTREMELY important to disclose any present or past environmental issues, no matter how small you might feel the issue is/was.  The sooner we find out, the sooner it becomes a non-issue.  Finally, some deals are just bad deals.  Don't expect us to put lipstick on a pig.