SBA 7(a) Loan for Gas Station Purchase: Complete Broker Guide

SBA 7(a) loans are the most common financing tool for gas station acquisitions in the United States. The program allows buyers to finance real estate, equipment (including underground storage tanks and fuel systems), inventory, working capital, and business goodwill in a single loan up to $5 million. For brokers, gas station deals are a steady source of transactions, but they come with unique underwriting considerations that require specific knowledge to navigate successfully.

Why SBA 7(a) for Gas Stations

Gas stations are a specific category of owner-occupied commercial property where the SBA 7(a) program fits particularly well. The business involves real estate, specialized equipment, inventory, and working capital, and the 7(a) program can wrap all of these into one loan. Conventional lenders often shy away from gas stations due to environmental risk, thin fuel margins, and the specialized nature of the business. SBA lenders that specialize in petroleum-related businesses are accustomed to these factors.

The typical structure looks like this:

Eligibility Requirements

The borrower must be a for-profit business operating in the United States. For gas station acquisitions, key eligibility factors include:

• The buyer must demonstrate relevant industry experience or have a credible plan to hire experienced management. Lenders strongly prefer buyers who have operated or managed gas stations before.
• The business must meet the SBA size standard. Most gas stations and convenience stores fall under NAICS 447110 (Gasoline Stations with Convenience Stores) or 447190 (Other Gasoline Stations), with size standards based on annual receipts.
• The borrower must inject equity, typically 10% to 20% of the total project cost. Gift funds and seller standby notes may be allowed under certain conditions.
• Personal guarantees are required from all owners with 20% or more ownership.

Environmental Due Diligence

This is the make-or-break issue for gas station financing. Every gas station deal involving real estate requires environmental review, and lenders are especially cautious because underground storage tanks (USTs) create potential liability that outlasts the loan.

At minimum, expect the following:

If contamination is discovered, the deal is not necessarily dead. Many states have petroleum cleanup funds (often called LUST funds) that cover remediation costs for qualifying properties. The key is whether the contamination is documented, actively being remediated, and covered by state programs or environmental insurance. Brokers who understand this nuance can save deals that less experienced intermediaries would walk away from.

Cash Flow Analysis

Gas station underwriting requires breaking down the revenue into its components, because fuel and convenience store operations have very different margin profiles:

Lenders evaluate the combined net cash flow against debt service requirements. A common mistake is presenting fuel gallons sold as the headline metric. Lenders care about the total business cash flow, not volume. A station pumping 80,000 gallons per month with a strong c-store operation generating $40,000/month in inside sales is a much better credit than a station pumping 150,000 gallons with minimal c-store revenue.

Packaging the Deal

A well-packaged gas station SBA loan application should include:

• Three years of business tax returns (or seller's returns if acquiring an existing station)
• Three years of personal tax returns for all guarantors
• Current profit and loss statement (trailing 12 months, broken out by fuel and c-store)
• Fuel supply agreement (existing or proposed)
• Environmental reports (Phase I at minimum, Phase II if available)
• Equipment list with ages and conditions (USTs, dispensers, POS systems, canopy)
• State UST compliance records and insurance certificates
• Business plan (especially important for buyers new to the industry)
• Purchase agreement with itemized allocation (real estate, equipment, inventory, goodwill)

The purchase price allocation matters for both tax purposes and underwriting. Lenders want to see how much is real estate (longer term, better LTV) versus goodwill (shorter term, harder to collateralize). A deal that's 60% real estate and 40% business value will underwrite differently than one that's 30% real estate and 70% goodwill.

Common Pitfalls

Brokers new to gas station financing should watch for these issues:

Brand lock-in. Many branded gas stations have supply agreements that restrict the buyer's ability to change fuel suppliers. If the buyer plans to rebrand, the existing supply agreement's termination provisions become a critical deal point. Some agreements include substantial penalties for early termination.

Tank age and compliance. Underground storage tanks installed before the mid-1990s may not meet current EPA and state regulatory standards. Replacing USTs can cost $150,000 to $300,000 or more, and lenders will factor this into the deal structure. Always verify tank installation dates and compliance history before committing to the deal.

Lease versus ownership. Some gas stations operate on leased land, particularly those on highway corridors or at major intersections. SBA 7(a) can finance business acquisitions on leased property, but the lease term (including options) must exceed the loan term. Ground lease terms and renewal options require careful review.

Seller financing conflicts. Sellers sometimes offer to carry a note to bridge the equity gap. The SBA allows seller standby notes under specific conditions (full standby for at least two years, no payments from business cash flow during standby). Structure this incorrectly and the SBA will reject the deal.

SBA 7(a) vs. SBA 504 for Gas Stations

For most gas station acquisitions, SBA 7(a) is the better fit because buyers need to finance the full business, not just the real estate. SBA 504 can work when the buyer already has working capital and is primarily purchasing the property and major equipment.

For a deeper look at how SBA programs compare across different deal types, see our guide on SBA loans for small businesses and real estate.

Frequently Asked Questions