How to Buy a Gas Station with No Money Down

  • Buying an existing gas station or convenience store can be a good way to start or expand a small business.
  • Most gas station loans will require a down payment or collateral to ensure you’ll pay off the loan.
  • It is possible to purchase a gas station or service station with no money down, but you’ll need to find the right lender and meet some strong qualifications in order to do so. 

Can You Buy a Gas Station with No Money Down?

There are absolutely ways to buy a gas station with no money down. Many small business owners have been able to purchase an existing business through 100% financing. However, there are a few hurdles that you’ll have to clear in order to do so.

First, you need to find a seller who is willing to wait a little bit longer to receive their payment for their gas station business. This is because financing always takes longer than an all-cash purchase, and financing without a down payment will probably take even longer. 

You may be able to find a seller who cares deeply about their business and wants to pass their gas station onto someone who will care about it, like you, and is willing to wait. But if you’re coming to the table without a down payment and relying purely on financing, you’re much more likely to find gas station owners who are ‌desperate and need to sell to the first buyer. In this instance, it’s important to be prepared so you don’t make a bad investment decision.

How to Finance a Gas Station Purchase

There are several ways to finance a gas station purchase. The type of financing you opt for will depend on factors such as your qualifications, current assets, and the financial health of the business you’re looking to buy. 

Pay for the Gas Station in Full

This is obviously the easiest way to acquire a gas station: pay for it in cash. However, this is not an option for most people, as it requires a lot of money upfront. And if you’re looking to buy a gas station with no money down, this option is probably furthest from your mind. 

Get a Small Business Loan

Small business loans are the most popular way to finance a gas station purchase. Conventional loans from traditional banks may be your best option, although you may face higher interest rates if you don’t have a down payment. You may qualify for a Small Business Administration (SBA) loan program like the SBA 504 or SBA 7, although these are much more difficult to qualify for. There are other government loans like the USDA B&I loan. 

Use Seller Financing

Some sellers may offer seller financing to sell you their gas station business fast (and usually not because it’s doing well). Seller financing means that the seller pays for some of the acquisition, and these payments are usually tied to the revenue of the business. This type of financing is easier to get than conventional financing, and it may have several benefits for the buyer, but it’s not usually made in the best of circumstances. 

Get a Business Line of Credit

Using business credit cards or business line of credit to fund a gas station purchase is a very non-traditional route, but it may work for some buyers. With a business line of credit or business credit card, you withdraw as much money as you need and only pay interest on what you use. This is a very flexible form of financing and may seem like an attractive option if you have trouble qualifying for traditional financing. However, it’s unlikely that you’ll be able to qualify for enough credit to purchase a full gas station. But you might ‌use this option to serve as the down payment. 

How to Qualify for a Gas Station with No Money Down

The number one way to qualify for a gas station with no money down is to have good business credit and personal credit. This is how lenders determine whether or not it’s risky to lend you the money you need. You can use tools like Nav to learn what your business credit score is and ‌how to establish business credit by following some of our tips. 

Other aspects of qualifying for a gas station loan include:

  • How big the loan will have to be and how capable the business will be of paying it back
  • Having a solid business plan
  • Showing that the gas station has been profitable in the past through a balance sheet, tax returns, and other financial statements
  • Proving that the gas station has diversified sales, good cash flow, and good working capital
  • Showing that you have industry experience and will be able to run the gas station business profitably 

Best Gas Station Loan Options

The best way to get a gas station loan is to find a lender that is comfortable financing gas stations. The second best way to get a gas station loan is to make sure you qualify for it. Nav can help you determine which loans you qualify for based on your business credit and other history. Sign up today to get started.

Here are a few gas station loan options that may work for you:

What to Consider When Buying a Gas Station

Even if your offer is not as strong as a cash-only or down payment financing option, it’s important to avoid buying the first gas station you come across. Make sure you research the gas station you’re looking to buy and make sure none of its existing issues are going to make it a sinkhole for you. Some red flags to look out for when looking into buying a gas station include:

  • Environmental issues — make sure you get a detailed assessment of the environmental state of the gas station to find any issues that could be expensive to fix. Tanks and pumps are especially important to address, because fuel leakage is one of the biggest environmental concerns a gas station may face. 
  • Equipment issues — do the pumps and tanks work as they should? Is there a functioning car wash on site? Does anything need to be repaired? Make sure to take this into account when you look into purchasing a gas station.
  • Financial issues — because gas prices rise and fall, most gas station business owners don’t make a lot of revenue from selling fuel. Instead, they earn income from convenience store sales or other amenities like car service or a car wash. If the gas station has had financial problems and doesn’t have a diversified income stream, you may have more difficulty finding business financing because the risk to the lender will appear too big. Make sure you get an accurate financial statement from the previous owner before you agree to buy. 
  • Location issues — a gas station needs to have a strong location in order to be successful, with a diverse group of people who buy fuel, snacks, drinks, and other items from the store. Also, you will want to be sure that the real estate that the gas station sits on is part of the deal, either by buying the real estate outright as part of the deal or including it as a lease on the terms of the loan. Finally, you’ll want to be aware if there is any criminal activity in the area, as gas stations can be repeat targets for theft or burglary.
  • Branding issues — many gas stations are part of a franchise and are required to sell certain brands across the board, from the fuel to the snacks to the drinks. A franchised or branded gas station may have greater support than an unbranded one when it comes to brand recognition and marketing. However, if a brand has a bad reputation, you’ll be working uphill against that with your customers. 

Is It Hard to Get a Loan for a Gas Station? 

Unfortunately, it can be difficult to get a loan for a gas station, even if you have a down payment. But by knowing what lenders will be more willing to finance your purchase, as well as options like seller financing and using a line of credit, there are certainly ways to buy a gas station business without a down payment.

Nav can help you determine which loans you qualify for based on your business credit and other history. Sign up today to get started.

This article was originally written on May 18, 2022.

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