You can get a better deal on your petrol station finance, if you’ve got an expert on your side.
Petrol is a staple of daily life and with over 33,000 megalitres sold in Australia each year, a petrol station makes for an attractive business proposition. Securing funding for the purchase or improvement of a service station isn’t always quite so simple.
Banks generally view petrol or service stations as specialised commercial property assets meaning the maximum value that some banks will finance can be much lower than standard commercial property. There are only a select few banks with an appetite for petrol station finance. Knowing which banks to approach and what they offer is critical when it comes to finding a better finance deal for your business.
We have been assisting business owners to fund commercial property acquisitions for more than 20 years and have a proven track record in negotiating favourable terms for the purchase and improvement of both freehold and leasehold petrol stations.
The level of funding available for petrol station purchase will be dependent on the business type as listed below:
Freehold / Going Concern Petrol Station
You own the physical property (Freehold) as well as the business (Going Concern) component. Cashflow is generated through the service station business. Funding is available for up to 70% of the value of freehold/going-concern petrol stations with interest only options available and full repayment terms of up to 15 years.
Leasehold Petrol Station
You own only the business component, have a lease agreement is in place with the Freehold owner (Landlord), and an agreed rental amount is paid. Funding is available up to a maximum of 50% of the purchase price for businesses less than $2 million. Interest only terms may be available depending on the strength of the application.
Freehold Investment Petrol Station
You own the physical property while the business is owned by a third party (Leasehold). A lease agreement will be in place that outlines the rental amount and terms of the lease. Cashflow is generated through rental income. Funding is available for up to 70% of the value of freehold service stations with interest only options available and full repayment terms of up to 15 years.
What will the bank assess?
As well as considering your equity contribution to the purchase, banks will review the following when assessing your loan application:
Supplier – are you going to be a franchisee with one of the major petrol retailers (e.g. Mobil, Caltex, Shell) or with an independent provider?
Management Experience – do you have experience in managing and running a retail business?
Locality – where is your service station position and does it have adequate access and traffic flow? What competition is there in the local area?
Cashflow – what cash flow does the service station produce and does it produce sufficient cash flow to cover your loan repayments? If you have other income sources outside of the business this can be used to strengthen the application and apply for a higher loan to value ratio.
Whether you are looking to finance, refinance, refurbish, extend or develop a petrol station we have the expertise to make it happen. Even if you’d simply like some guidance around your business opportunity, the pros and cons, industry trends or mistakes to avoid, we can point you in the right direction.