This topic contains 2 replies, has 2 voices, and was last updated by Steve Grelle (SBA Guru) 1 year ago.
LOAN TO OPEN A GAS STATION
HOW MUCH DO I NEED FOR DOWN PAYMENT? AND IS IT POSSIBLE TO GET MORE INFORMATION ON A LOAN OF THAT TYPE?
The amount of your down payment is going to depend on a lot of factors, such as:
– Type of loan you’re getting
– Your personal credit history
– Your lender’s underwriting process
– The amount of collateral you have to put up for the loan
– What your business plan looks like
– How confident your lender is in your ability to repay the loan
Most traditional loans will require 10-20% down but it could be as much as 30% if you don’t have any collateral.
The down payment does depend on a lot of different thing. For an SBA 504 Loan the standard down payment is 10% but a gas station is a special purpose property, which requires an additional 5% and if you are purchasing it it is likely to be considered a start-up which typically requires an additional 5% for a total of 20%. This is determined by the lower of 80% of the purchase price or 80% of the Appraised as completed value. Whichever is lower. If you do an SBA 7(a) you can typically do just a 10% down and even include goodwiill. The rate is typically lower and fixed on the SBA portion on the 504 and higher and variable on a 7(a). Ultimately the down payment above and beyond that is a credit decision on the part of the Bank and CDC if you are doing a 504 loan.
On a side note, A gas station typically requires a Phase I and Phase II environmental analysis which takes a bit of time. Be sure to build that into any contingency in your contract and be ready for the added cost.