If you’re an independent gas station dealer who has tried to buy or refinance a site recently, you’ve gained firsthand experience of the stark new reality of the financial markets.
In the past you had choices. At the national level, major institutions like Citigroup provided competitive options on conventional mortgages and had virtually unlimited funding capacity. At the local or regional level, small banks could help with either conventional or SBA loans. Numerous brokerage firms, some locally based, many internet based, promised to ‘shop’ your loan for the best terms. Reflecting the excess of liquidity in the financial markets, rates and terms were highly competitive. Floating rates at or below prime were common. Because the yield curve – the difference between short term and long term interest rates – was so low, fixed rates were also available at attractive levels.
Less-than-stellar borrowers found themselves in the enviable position of having lenders fight over them, while those who were more stable could expect terms once reserved for only the best of the blue-chip players in the industry. All because there was too much money chasing too few deals. How times have changed.
Despite today’s business environment, the good news is that financing is still available for independent dealers in the Convenience & Gas (C&G) industry. The bad news is, you have to know where to find it and how to qualify for it.
With credit standards tightened considerably, obtaining a loan requires you to put the best face on your business and management. You will need to work hard to ensure your lender is comfortable with the underlying financials for your business. Solid financials presented in a professional format, strong references from suppliers and bankers, a proven track record for your business operations, and excellent personal credit are crucial elements. Equally important is the brand image of the retail site(s) being funded.
And remember, your lender will evaluate everything in light of the risk involved. Regardless of how promising the deal appears, the lender will want to protect itself with an exit strategy that details how it will unload your store without taking a hit.
Author: Kevin Morley
February 19th, 2009 at 2:51 pm
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