Key Challenges of Getting Gas Station Financing

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Things to consider when purchasing a gas station

Many individuals considering entrepreneurship decide to go into the gas station and/or convenience store industries. In fact, according to The Association for Convenience and Fuel Retailing (NACS), in 2023 there are more than 150,000 convenience stores in the United States and 79% of them sell motor fuels. The number of successfully operated gas stations already in 2023 has increased more than 1.5% from the previous year, which may indicate strong growth potential in the industry.

One of the benefits of going into business as a gas station operator is geographical flexibility. However, before getting started with a business plan or a loan application for startup financing, small business owners must decide which locations make the most sense for them. Currently Texas, California, and Florida are named as the top states to start a gas station with a convenience store included, while Oklahoma and South Carolina sit at the top of the list of U.S. states with the most gas station foot traffic.

Some other factors to consider when planning for a gas station business include:

Business model

Getting started in the gas station business looks different for every entrepreneur. Some business owners choose to build or purchase an independent gas station, while others decide to buy a gas station franchise. Of course, like any other business decision, there are advantages and disadvantages to each business model. Advantages of purchasing a franchise may a built-in customer base and corporate support for the entrepreneur, like mentoring, marketing strategies, and financial assistance. Independent gas stations, on the other hand, offer entrepreneurs more flexibility and options when it comes to location, hours, business name, and products and services offered.


Chances are, by the time you’ve decided to purchase a gas station, you’ve already settled on a city and state to open your new business. However, there is more to location than just the zip code. Gas stations need to be positioned in a location that is convenient for travelers, as well as local residents. While creating a flow of regular customers is important, there are ample opportunities for gas stations located close to highways and interstates to gain the business of truck drivers, out-of-town travelers, and fleet vehicles.

Sources of income

Since there is a lot of competition in the gas station industry, profits from gas sales are very low. Station owners do not have a lot of flexibility when it comes to gas prices. If the gas is priced too high, customers will just continue on to the next corner station. Adding additional sources of revenue, like a car wash, snack bar, automotive repair and service station, or grocery sale, it is the best way for gas station owners to generate additional profit. When creating your business plan, take a look at what other successful stations offer or what services or products may be lacking in the area.

Types of gas station loans

As the business plan for your new business becomes finalized, you’ll also need to consider how you’re going to finance your new venture. There are several funding options available for new business owners that work well with either a franchised location or an independent station. Some franchisors also offer private financing options or seller financing for their franchisees. 

Term loan

A term loan is a traditional arrangement where the borrower receives a lump sum of money upfront and agrees to repay the loan according to the repayment terms. Interest rates for term loans can be fixed or variable, where they fluctuate based on the market rate. Term loans can be either secured with collateral or they can be unsecured, where no collateral is required.  Borrowers may still be required to attach a personal guarantee or provide a down payment for an unsecured gas station loan.

Equipment loans

The equipment required to run a gas station depends on the type of location it is and the services offered. However, if you’re purchasing or building an independent station, equipment financing can be a great resource for financing storage tanks, pumps, refrigeration, and more. Equipment loans can also be used to purchase computers, computer software, point-of-sale (POS) systems, automotive repair machinery, and other business equipment. Since the asset acts as collateral on the loan, equipment financing can offer low-interest financing. The term of the loan is determined by the useful life of the asset.

SBA loan

SBA loans are a business financing option for small business owners where the funds are partially guaranteed by the U.S. Small Business Administration. There are several different SBA loan programs depending on the intended use of funds, the creditworthiness of the borrower, and the amount of loan desired.  SBA loans generally require good credit and offer lower interest payments and longer repayment terms than other lending options.

Some popular loan programs available through the SBA are:

  • SBA 7(A) Loans – Approved credit lines up to $5 million that can be used for large purchases, working capital, and refinancing high-interest debts.
  • SBA Microloans – Allows up to $50,000 for business needs, based on approved business plan
  • SBA Express loans – Approved borrowers receive up to $350,000 to be used as working capital.

Commercial Real Estate Financing

Real estate financing may be the best choice if you are choosing to purchase an existing gas station. This type of financing can be used to purchase land, buildings, convenience store space, or to fund new construction. Real estate loans offer lower interest rates and flexible terms based on the loan amount, lender, and creditworthiness of the borrower.

Business line of credit

A business line of credit is not a loan, but it is a type of revolving credit that works like a business credit card. Approved borrowers are awarded a maximum credit line and can then draw on that credit line anytime they need capital for large purchases, upgrades, or working capital. Any funds that have been withdrawn are repaid with monthly payments that include financing costs calculated using either a fixed or variable interest rate. When the balance is repaid, the funds become available again.


Crowdfunding can be a way to raise capital for buying a new gas station or buying into a franchise without a loan approval. It works when an individual, or business owner, collects many small contributions from different investors or donors. Most crowdfunding is done using platforms like GoFundMe or Kickstarter. Contributors may expect nothing in return or invest funds with the understanding they’ll receive a reward.

Business Credit Cards

Business credit cards are a great financing tool for startup station owners or seasoned fuel store operators that want to have credit available in case of an unexpected expense, like a repair or large purchase. The financing costs of credit cards can be higher than loans because the interest rates are typically higher.

Gas station financing challenges

Securing a loan for a gas station can be much more difficult than other types of small business loans. The following challenges specific to the nature of this business, but are all possible to overcome with some research, persistence, and the right lender. 

  • Documentation – A large percentage gas station purchases are cash sales. For that reason, it can be difficult for startup entrepreneurs to gather the documentation necessary to get a small business loan. Gas station operators must often rely on income tax returns and excellent financial records to qualify for business financing.
  • Investment – Gas stations are significant investments that typically require a lot of capital upfront. Taking on a business loan will require protecting personal liabilities through the right type of business loan and having confidence in the industry. Luckily there are many kinds of start-up financing and service financing options available to station owners, if you know where to look.
  • Inconsistent cash flows – Gas stations are not a seasonal business, but the cash flows can vary greatly from month to month especially for new business locations. This can make it challenging to get approved for traditional bank or conventional loans. Working with a lender experienced in similar financing arrangements can help entrepreneurs access working capital in the form of gas station loans, lines of credit, gas station financing, and other forms of commercial lending that can ease any cash crunch.
  • Startup setbacks – Some business financing options, like SBA loans and traditional bank loans, require a specific amount of time in business. This is challenging for new business owners because they have not established business credit history and cannot provide documentation showing tow years of annual revenues. Working with an alternative lender on startup financing for gas stations is the best way to overcome this setback.
  • Environmental concerns – There is unique environmental due diligence required for gas station buyers, the environmental risks of pollutants and toxic spillage into the air and soil may make getting a loan difficult. Working with a lender that has industry experience is the best way to overcome financing obstacles because of environmental issues.

How to get a gas station loan

While there are several great options for gas station financing, it can be overwhelming to know where to start. The loan options, documentation requests, and eligibility requirements new gas station operators face will depend on the type of lender they work with.

Where to get a gas station loan

The financing options for gas station businesses include franchise financing, traditional lenders, like banks and credit unions, and alternative lenders. Entrepreneurs in the convenience and fuel industries may have a hard time securing capital through traditional banks because of the challenges previously mentioned. Typically, gas station entrepreneurs have better luck working with alternative loan providers, like Biz2Credit. Here’s why:

  • Alternative lenders have experience with startup financing and gas station loans so they understand how the business works and can effectively guide applicants through the loan process.
  • Working with the right lender will save a lot of time. Alternative lenders offer a faster application process, which can typically be completed online.
  • Alternative lenders consider future income potential in addition to credit, so start up owners or entrepreneurs with bad credit scores are more likely to be approved.

Documentation needed for a gas station loan

To expedite the loan approval process, borrowers can gather some basic documentation before completing the loan application. The following list includes common documents that are requested by lenders, but check with your lender for a customized list.

  • Business plan
  • Three years of business and/or personal income tax returns and financial statements
  • A list of personal and business assets
  • Debt schedules for business and personal loans, cash advances, and financing agreements
  • Professional resume, highlighting the borrower’s previous work history
  • Legal documents, including the Articles of Incorporation for the new business entity
  • Bank statements for all personal and business bank accounts

Key takeaways

Purchasing a gas station is a great way for first time or seasoned entrepreneurs to make a lot of money and build a successful business. Once you have decided whether you’re interested in purchasing an independent station or purchasing a franchised location, you can begin to consider other factors like location, prices, and financing options.

No matter the specifics of your business plan, working with an alternative lender, like Biz2Credit, is a great way to review multiple loan offers and find the best fit for your business needs. Rajesh Jiwani, owner of a Georgia gas station, reached out to Biz2Credit after being turned away at a traditional bank and was quickly able to secure a business loan and a cash advance to cover the costs of expanding his business.

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