Can I get a loan to purchase a petrol station?

Share your concerns & ideas about commercial property loans in Australia.
rickieg
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Joined: Thu Mar 12, 2015 5:38 pm

Can I get a loan to purchase a petrol station?

Postby rickieg » Sun Mar 15, 2015 7:15 pm

Hey there,

I’ve been working as an assistant manager of a local grocery store in Russell for the last five years. I’m tired of working under someone else so I want to start a business of my own.

A friend suggested that I could invest in a petrol station even with a small investment. The problem is that I don’t have the money to make the whole deposit for the purchase. And I also don’t know if the banks will lend me money to purchase a petrol station.

Can anyone in this forum help me be clear on this matter?

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Otto Dargan
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Re: Can I get a loan to purchase a petrol station?

Postby Otto Dargan » Mon Mar 16, 2015 11:43 am

Hi and welcome to the forums rickieg.

It may be possible for you to get a commercial loan for a service station. Purchasing a petrol station is a popular investment among smaller investors because of its secure return.

However, lenders may hesitate lending for such an investment because they tend to see service stations as a specialised property - they may find difficulty selling the property if you are not able to make the repayments of the loan.

You may still be able to borrow up to 50% to 60% of the property value. It should be noted that the lenders generally require a business plan and profit forecasting for the service station. You may even be able to get interest rate discounts, however, it will largely depend upon the lender and your financial situation.

Are you planning on leasing the land for the business or buying it off as well?

Cheers,
Otto
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rickieg
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Joined: Thu Mar 12, 2015 5:38 pm

Re: Can I get a loan to purchase a petrol station?

Postby rickieg » Mon Mar 16, 2015 1:32 pm

I’m planning to buy both the land as well as the business. Why do you ask?

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Otto Dargan
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Re: Can I get a loan to purchase a petrol station?

Postby Otto Dargan » Mon Mar 16, 2015 5:32 pm

Hi rickieg,

If you own both the business and the land, then you are said to be in a freehold arrangement.

You may be able to borrow more this way as opposed to when you own just the business and are leasing the land from someone else. This is because lenders lend to you against the profitability of your business if you own only the business and not the land.

If you own both the land and the business, then the land itself can be taken as security in addition to the profitability of the business. This way, the lender may be willing to lend you more, or at a higher Loan to Value Ratio (LVR).

However, it should be noted that the lender may want to be assured that the service station has a good amount of traffic such as busy thoroughfares and highways. If the petrol station is on a quiet road without traffic, then lenders may not be willing to lend you at a high LVR.

To learn more about service station loans, you can check out our website. You can also give us a call on 1300 889 743 or fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

rickieg
Posts: 10
Joined: Thu Mar 12, 2015 5:38 pm

Re: Can I get a loan to purchase a petrol station?

Postby rickieg » Mon Mar 16, 2015 9:32 pm

Thanks for this info! I’m really excited to start my own business. I’ll need all the help I can find to get approval on the loan. I’ll give you a call by the end of this week to discuss my situation in detail.

penalcolony
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Joined: Mon Mar 16, 2015 6:54 pm

Re: Can I get a loan to purchase a petrol station?

Postby penalcolony » Fri Apr 03, 2015 11:27 am

Hi home loan experts,

I’m here because of my younger brother. He came to me last week saying that he’s planning to invest in a service station. I’m happy that he wants to do his own thing but sometimes he rushes into making decisions. That’s why I’m doing some research for him.

This thread has helped me learn a lot about petrol station loans, especially about how a suitable location can have such a big impact on the way a lender evaluates a loan application.

Can anyone here give me an idea about other similar factors that’ll influence a lender’s decision?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Can I get a loan to purchase a petrol station?

Postby Otto Dargan » Fri Apr 03, 2015 3:11 pm

Hi penalcolony,

One of the most important factors which may influence a lender’s decision on whether to lend to a borrower for the purchase of a petrol station is the fuel supplier.

Most lenders prefer borrowers who enter into a franchise model with a major, well-established company like Woolworths, Coles, Caltex, Shell, or 7-Eleven.

The reason is that all tanks, pumps, and line work are the responsibility of the company that owns them. They are also in charge of making it legally safe for redevelopment when the lease expires. This means that the borrower does not bear the cost and therefore, it is less risky for the lender to approve the loan.

Another important factor is experience. It may be very difficult to get funding for a petrol station unless a borrower already owns one and has extensive experience in operating it.

Most lenders may want to know whether or not you have past experience of running a similar business before lending to you. This way they can be assured that you can operate a profitable business and will not default on your loan.

You can visit our website to find out more.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

penalcolony
Posts: 7
Joined: Mon Mar 16, 2015 6:54 pm

Re: Can I get a loan to purchase a petrol station?

Postby penalcolony » Fri Apr 03, 2015 5:18 pm

Thanks for the detailed info, Otto. I didn’t think you’d reply within a few hours. I’ll pass on this knowledge to my brother. I’ll also ask him to go through your website to learn more about this before taking any hasty actions. Thanks again! Have a great weekend!


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