Petrobanc Finance Blog

Here’s a quick list of the most important things that prospective borrowers can do to ensure they merit financing for their gas station.

Use a CPA, not a bookkeeper. You need financial statements that meet GAAP (Generally Accepted Accounting Principles) standards so that your lender will feel they can rely on the numbers they’re looking at. They’ll be more inclined to give you a better deal and the money you will save in the long term will pay back the cost of a CPA many times over. A ‘tax preparation firm’, or your spouse using QuickBooks, won’t work.

Build your cash reserve. The days of 90% financing are gone. At best, you’ll get a loan for 80% of the appraised value of the land, building and equipment – nothing on business value. Many lenders are holding the line at 75% or less, knowing that the more of your equity you have in the game, the less likely you are to default (and if you do, the less they’ll lose).

Clean up your credit score. Scores of 680 or more for each loan guarantor are the minimum today. Get professional advice on how to improve your score. Tragically, many prospective borrowers fail because of old cell phone charges or doctor bills that insurance failed to pay. Better to address these problems before seeking financing. The money you’ll save by getting better loan terms will most likely cover the cost of fixing these problems.

Brand your station with a major brand image. The lender will infer that your site meets image and operational standards that improve attractiveness to customers and make your site more competitive. Many lenders will visit your site personally to verify the quality of the site.

Establish a long-term supply agreement with a reputable jobber. Lenders want to have confidence in the supply of your most important product.

Understand and operate your business. Absentee owners are one of the most common reasons for business failures. If a lender calls you and hears the cash register ring in the background, your involvement in the day-to-day management will become obvious.

Have your paperwork ready. Lenders are inundated with commercial loan requests. They’re time-constrained, so if your submission is organized and substantive, they’ll move your request to the top of the pile.

Organize the following documents in a folder:
- A summary of your loan request (how much, what is it for)
- Your resume, including a summary of your company’s organizational structure, and of your experience in the industry.
- Corporate tax returns (signed) for the last two years (unless you are a sole proprietorship)
- Personal tax returns (signed) for each owner for the last two years
- Financial statements for each site for the last two years, plus through the most recent quarter of the current year. Revenue and Cost-of-Goods-Sold (COGS) should be broken out for fuel, C-store and other revenue generators. Balance sheets for each year, and the current quarter should be included.
- Gasoline sales (in gallons) month-by-month for the last two calendar years, and the current year. Lenders who understand gas stations will want this information, and you’ll want to have a ready explanation for any declines in volume. If your jobber provides this information, even better as it offers a third-party verification of your performance.
- Personal financial statement: you’ll need to show you’ve got the cash to close the deal
- A copy of your supply agreement: from a reputable jobber
- References: contact names and numbers for your jobber, your banker, and any major supplier
- Pictures of your site: while not mandatory, may have sufficient Wow! to gain more attention

Above all, ensure you hire a CPA that understands your business. This list starts and ends with this, because your CPA is absolutely critical to your success in securing financing.

Author: Kevin Morley

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