Loans to buy a petrol station

Petrol stations are one of the few UK retail businesses that can provide 24/7 revenues. 

 From motorists buying fuel and travelers wanting snacks, to last-minute shoppers needing an essential item or early birds chasing their daily newspaper, petrol stations can generate a constant stream of customers. This means buying a petrol station can be a solid business opportunity, however, petrol stations don’t come cheap. Whether you buy a franchise operation, or an independent station, the cost can be high – for example, a BP franchise will typically require a total investment of £2million by the time the franchise fee, startup costs and shop build-out are factored in.

Few people will have the cash required to buy a UK petrol station, however, there are a range of loans available to fund the purchase and upfront costs. Read on to find out more about petrol station loans and how to get your next big business concept firmly on the road.

What types of loan are available to buy a petrol station?

Petrol station loans fall into two main categories:

Commercial mortgages or franchise finance to fund a purchase and/or redevelopment costs

Commercial mortgages function like a regular residential mortgage. The lender provides part of the cost to buy the petrol station, and they take a legal charge over the property as security. You pay back the loan over 20 – 30 years. This type of loan may also cover some of the initial build-out costs, or they could be financed with a separate construction loan. Alternatively, franchise finance, which may offer a package of funding options, could be used to buy a petrol station, cover the build-out costs and even provide some funds towards your startup expenses.

Working capital loans to pay for startup and ongoing expenses.

As well as paying for stock for your shop, hiring staff, marketing, and other startup expenses, you will usually be required to pay a hefty deposit for fuel. This can badly dent your cashflow. Fortunately, finance in the shape of small business loans, asset finance, merchant-cash advances, VAT loans, and the leasing of equipment can ease the burden. Some of these loans need no or little security to obtain and poor credit may not be an obstacle to funding.

What to consider before buying a petrol station?

Buying a petrol station is a big decision. Here are a few things to consider before making the leap.

Location

Planning permission for new petrol stations is difficult to obtain, so you will usually buy an existing business. Just like houses, the most important thing with any petrol station purchase is location, location, location. You need a constant flow of motorists and local shoppers. Corner sites, locations on major roads, sites on busy junctions and crossroads, stations close to motorways, airports and popular tourist venues are ideal spots to buy a business. As you might expect, petrol stations in busy urban areas will generate more turnover than one in quiet rural locations, although the purchase price will reflect the economic possibilities – a city will usually cost a lot more than a countryside location.

Current assets

Even using a range of financing products, you will still need some cash to buy and start your petrol station business. For example, a commercial mortgage will typically require a 10% to 25% deposit. What assets – cash, property, stocks, bonds, etc. – can you bring to the table, and how easy will it be to either use them as collateral for a loan or to sell them to raise hard cash? Starting your petrol station business without adequate assets or funds to get you through the cost phase and into the profit-making phase could leave you exposed to unnecessary risk.

Strategy

What is your plan for the business? Do you intend to hold it for a long-term investment, or do you plan to develop the station, perhaps adding more features such as a drive-through car wash, and then sell it on for profit? Your overall business strategy will affect the financing you may obtain and how you build the business over time.

How to apply for a loan to buy a petrol station

Once you’ve found a site that fits your business strategy, you can apply for a petrol station loan.

Evidence required

  • Lenders will usually need to see the last 2-3 years accounts of the business, plus details of the site – is it leased or freehold? What are the station’s facilities and features?
  • Your business history – if any – plus a solid business plan.
  • Details of assets for security and any other supporting funds.
  • If it’s a franchise, the terms and conditions of the franchisor.
  • If it’s an independent station, the contract, terms and conditions of the fuel supplier.
  • Standard credit and security checks.

Do I need industry experience?

No, although it is helpful, particularly when applying for a franchise operation. 

Get started with Swoop

Owning a petrol station can provide you with a lucrative retail business that has less reliance on seasonal income, although finding the best finance to cover the purchase price and support your new operation into the money-making phase can be challenging. However, that doesn’t mean you have to park your big idea. From commercial mortgages and franchise finance, to working capital loans, Swoop has you covered. 

Don’t get stuck in first gear. Get in the fast lane with Swoop. Buy your petrol station now.

Testimonials

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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