Gas Station Financing tends to be a very specialized form of commercial lending.

Due to the increased focus on environmental issues and the related environmental laws focused around environmental liability issues, there are less commercial lenders interested in financing gas stations now than there were several years ago.

Any financing request, regardless of the lending source, will require recently completed Phase I and Phase II environmental audit reports from a recognized auditing group.  If there is a material amount of contamination detected, further levels of testing may also be required as well as the completion of remediation work identified.

Interested lenders are also going to require a commercial appraisal of the gas station which is also a fairly specialized activity that will need to be completed by an accredited commercial appraiser that is acceptable to the lender.

For the most part, gas stations are financed by private sources that have a strong focus in this market in order to properly understand the market risks as well as all the operational issues that need to be taken into consideration when reviewing a request for commercial mortgage financing.

Because most of the funds available come from private sources, the mortgage rates of interest are going to be higher as well as the lender fees on closing.  So in order for a business to cash flow a higher rate mortgage, it may require a higher owner invest than what you’d typically find in other commercial properties where the mortgage loan to value averages out at 65%.

At the same time,  a borrower may still be able to acquire institutional financing if there are loan guarantees or lease guarantees provided by one of the major gas and fuel companies that meet the requirements of a traditional bank’s commercial financing program.

Private mortgages  can also be interest only or amortized payments, depending on what the lender is prepared to offer and what the borrower is prepared to accept.  For interest only scenarios, a long term financing strategy will need to be developed to refinance the mortgage at some point or pay it out from other sources in order to pay off the principal.

If you’re seeking gas station financing in Ontario, please give me a call and I will quickly review your situation and provide any options that would be available to you.

Click Here To Speak With Commercial Mortgage Broker Joe Walsh

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