Arco Gas Station Purchase Approved! No comments yet

Lending Resources has been busy trying to find financing for the buyer of an Arco station in Suisun City, CA since September 2008.  Most lenders that were in the business of financing gas station purchases in 2008 folded those loan programs by the time we began looking for this loan.  That made this loan that much more difficult to find.

This particular purchase involved 2 difficult challenges to obtaining financing.  The first challenge was that Arco does not provide the lender with a history of operating expenses.  As a result, it’s hard for a lender to gauge whether or not the Arco station in question is making enough money to support the mortgage debt that’s being considered for the loan.  They do provide the sales figures for the amount of gallons sold as well as the sales of the AM/PM convenience store on the premises, but that still does not tell the lender how profitable they are nor what the costs are to operate the station.  The second difficulty is that this particular station is contaminated.  Most lenders don’t want to even go near a contaminated station let alone finance one. How did we manage to get this loan approved?

The answer lies with a combination of sheer determination to find a lender as well as having a buyer with very good credit, enough liquidity to buy the business portion of the station and, in addition, to be able to put down 50% for the real estate portion of the purchase. In addition, Arco agreed to indemnify the buyer and lender of any damage due to the contamination.

As one can imagine, there were a lot of financial records that the bank required of the buyer’s businesses and tax related information before we could obtain final approval.  Now, the only thing left is to obtain an appraisal and a phase 1 environmental report.  Both of these will be done simultaneously to one another so that we can close escrow within the next 3 to 4 weeks.  We expect the appraisal to be about 30% higher than the purchase price, because its sales over the past 5 years have been robust. We also don’t expect any surprises in the phase 1 report.  Moreover, Arco has guaranteed the buyer and lender against any losses from the contamination. This loan approval has been very satisfying because of the challenges that both the borrower and Lending Resources faced.  Lending Resources worked very closely with the borrower over the past 5 months to insure that we satisfied the lender’s demands.