Gas Station Financing: Buying a Station, SBA Loans and Tank Due Diligence

What you are financing when you buy a gas station

A typical acquisition has four parts: the land and building, the fuel system (tanks, lines, dispensers and canopy), the business itself including the store and its goodwill, and opening inventory of fuel and merchandise. Some deals add a car wash, a quick-service food counter or a repair bay. Others are business-only purchases where the buyer leases the property from the seller or an oil company and buys only the operation.

The fuel supply agreement deserves as much attention as the purchase price. A branded station buys fuel from a distributor or refiner under a contract that may set the term, minimum volumes, image requirements and penalties for early termination. Read it before you sign a letter of intent, and ask the lender how it views the remaining term. A supply contract with heavy debranding penalties can limit how you run the station for years.

SBA 7(a) and 504 loans for gas stations

SBA 7(a) is the most common route for a first station. SBA lists the uses as including acquiring or improving real estate, working capital, machinery and equipment, furniture and fixtures, and complete or partial changes of ownership, and the maximum loan is $5 million. SBA’s lender program comparison shows 7(a) maturities of 10 years or less unless the loan finances real estate or equipment with a longer useful life, and up to 25 years for real estate. A blended loan for a station is often split, with the real estate portion on the long term and goodwill and inventory on a shorter one.

SBA 504 loans finance major fixed assets such as land, buildings and equipment, with a typical structure of a bank loan for up to 50 percent of the project, a Certified Development Company loan for up to 40 percent, and at least 10 percent from the borrower. Maturities are 25 years for real estate and 10 years for equipment, at a fixed rate on the CDC portion. A 504 loan does not fund goodwill or working capital, so a business acquisition with significant goodwill often uses 7(a) instead, or pairs the two.

To qualify, a business must be for-profit, operating, small under SBA size standards, creditworthy, able to show a reasonable ability to repay, and unable to obtain the credit on reasonable terms from non-government sources. Lenders also look for station or retail management experience. Buyers who have managed a store for another owner, or who own a station already, are much easier to approve. Published SBA rate ranges in 2026 run about 10 to 13 percent; confirm current maximums with the lender.

Environmental due diligence: Phase I and underground tanks

EPA defines an underground storage tank system as a tank plus connected underground piping with at least 10 percent of its combined volume underground. About 534,000 active petroleum USTs operate nationwide. EPA notes that until the mid-1980s most tanks were bare steel, which corrodes, and that leaking tanks are a common source of groundwater contamination. Federal law since 2005 requires regulated tanks to be inspected every three years, and states run most UST programs and may set stricter rules than the federal ones.

Expect the lender to order or require a Phase I environmental site assessment before closing. EPA’s All Appropriate Inquiries rule recognizes ASTM E1527-21 as a standard for a Phase I, and it explains why buyers do this work: under the federal Superfund law, owners can be held strictly liable for contamination on property they own, while buyers who complete All Appropriate Inquiries may qualify for liability protections. A Phase I reviews records and past uses and inspects the site; if it finds a recognized environmental condition, a Phase II with soil or groundwater sampling may follow.

Alongside the assessment, collect the station’s tank paperwork: registration with the state, installation dates and tank materials, leak detection and testing records, the most recent inspection, and any past release reports with closure or no-further-action letters. A station with old single-wall tanks may need replacement soon, and that cost belongs in your offer price and your loan request.

Tank financial responsibility and insurance

Federal rules require tank owners and operators to show they can pay for cleanup and third-party damage if a tank leaks. In EPA’s guide to these financial responsibility requirements, petroleum marketers such as service stations and truck stops need $1 million of per-occurrence coverage, plus an annual aggregate of $1 million for 100 or fewer tanks or $2 million for more than 100. Owners can meet the requirement through a qualifying state fund, an insurance policy, self-insurance under a financial test, a corporate guarantee, a letter of credit or a surety bond.

Lenders will want proof that coverage will be in place at closing. Pollution liability premiums depend on tank age, construction and history, so quote coverage during due diligence rather than after. EIA notes that the federal tax on gasoline includes a 0.1 cent per gallon fee for the Leaking Underground Storage Tank Trust Fund, which supports cleanups where an owner cannot or will not pay; it is not a substitute for your own coverage.

Fuel margins versus in-store margins

Fuel is usually most of a station’s revenue and a much smaller share of its gross profit. EIA estimates that distribution and marketing, which includes the costs and profits of distributors and retail dealers, made up about 18 percent of the average 2025 retail price of regular gasoline of $3.10 a gallon, or about 55 cents. The station’s own margin is only part of that, and it moves with wholesale prices; when wholesale costs rise quickly, retail margins often compress before pump prices catch up.

The store is where most stations make their money. Packaged drinks, snacks, prepared food, tobacco, lottery commissions and services such as a car wash usually carry much higher percentage margins than fuel, and the gallons bring the customers in. Lenders look at both lines separately: monthly gallons and cents per gallon from fuel reports, and inside sales and gross margin from the point-of-sale system and tax returns. Sales the seller cannot document will not count toward the loan.

Worked example: testing a $2,385,000 station purchase

Hypothetical, not an offer. A buyer with six years of store management experience agrees to buy a station and convenience store for $2,385,000: $1,640,000 for land, building and fuel system, $585,000 for the business and equipment, and $160,000 for inventory. Assume a 10 percent buyer injection, $238,500, and a 7(a) loan of $2,146,500 at 10.75 percent. The real estate portion, $1,476,000, is amortized over 25 years at about $14,200 a month; the remaining $670,500 over 10 years at about $9,142 a month. Total debt service is about $23,342 a month, or about $280,104 a year.

Hypothetical, not an offer. The station sells 98,400 gallons a month at an assumed 31 cents a gallon of gross margin, about $30,504, and $142,600 of inside sales at an assumed 32 percent margin, about $45,632. After assumed operating costs of $44,300 a month, cash available for debt service is about $31,836, which covers the payment about 1.36 times. If the fuel margin fell to 22 cents, fuel gross profit would drop to about $21,648 and coverage to about 0.98 times. Coverage stays at 1.25 times only while the fuel margin holds at about 28.3 cents or better, which is exactly the sensitivity a lender will test.