Financing A Gas Station Without
Management Experience? Good Luck!
Recently, financing gas stations, convenience stores and other petroleum related properties
has become more significantly more difficult. Foreclosures and defaults are up significantly. One of the
biggest common denominators of defaults and foreclosures in this asset class today are dealers and operators
that lack direct industry experience.
Direct industry experience is defined today as someone who has either owned, operated or managed
a gas station, convenience store or truck stop for a minimum of three years. Lenders today are not looking to
finance people that are accountants, attorneys, IT professionals or even people who have been in retail in general.
Because of a current credit crunch and the convenience and gas (C & G) industry having a black eye from
increased prices, declining fuel being sold and declining profit margins by the individual dealers and operators
that own these stations, it has become increasingly more difficult to finance this asset class.
Even if you have worked at a 7-Eleven as an employee, that still is not being considered
necessarily "industry experience" unless they have specifically had managerial experience, i.e. hiring/firing,
ordering inventory, pricing inventory, pricing fuel, payroll, etc. In short, if you have not managed, owned or
operated a gas station or convenience store, your changes of getting a loan is very small in today's current
So what are your options if you're looking to buy a gas station or gas station franchise? One
obvious solution is to add a partner that has direct industry experience. This does not mean that you have to make
them a 50/50 partner either, just someone that can be responsible for the running of the business. You can keep the
seller on as a minority owner (less than 20%) for a period of time so they can get most of the cash they want and
can train you for a minimum of six to twelve months and buy them out at that period.
You can also keep existing management, but you probably will need to offer some ownership
(5-10%) because a manager does not necessarily have a financial motivation to stay with you if they can find
employment elsewhere. A small amount of ownership provides incentive. If you will be purchasing a gas station or
convenience store and a major oil company will be supplying fuel instead of a local fuel supplier (jobber) they
will most likely required you to attend an oil company school, but that will be insufficient from a lender's
perspective in terms of industry experience. If you are looking to purchase a gas station or convenience store and
you do not have the direct experience, you should have this as part of your negotiations with the seller.
Harold Jaynes has been involved in the financing of gas stations and convenience stores since
1999. The company he is involved with is PetroMAC and more information about financing this asset class can be
found at http://petromac.com
Article Source: http://EzineArticles.com/?expert=Harold_Jaynes
Article Source: http://EzineArticles.com/986014