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Gas Station Hard Money Loans
Gas station hard money loans are a type of short-term financing solution for gas station owners who may have challenges...
Automotive and gas station owners have the option to use hard money loans secured by their real estate to quickly access cash. Hard money loans differ from traditional loans in that they’re short-term bridge loans that help borrowers acquire, refinance or reposition debt before taking out long-term financing or selling the property. Borrowers who are in transition and can benefit from a quick-closing, short-term loan may see the benefits of this option.
While automotive and gas station hard money loans do offer several advantages, they also come with their own set of drawbacks. They often have higher interest rates and shorter repayment terms than bank loans. However, flexible and accessible hard money loans can be a good option for business owners who need quick, short-term financing, with less financial scrutiny than an institutional commercial mortgage.
In this blog post, we’ll discuss the key features of automotive and gas station hard money loans: terms and pricing, pros and cons, requirements for obtaining financing, and our experience at First Capital Trust Deeds (FCTD) brokering loans for gas station and automotive real estate owners.
One reason automotive and gas station hard money loans attract business owners is that they’re typically easier to obtain than traditional bank loans. A hard money lender, also known as a private money lender, will usually forgo most of the detailed financial and real estate analysis that banks require when underwriting a loan.
But the lender won’t completely disregard the finances. They’ll want to see 6-12 months of bank statements to determine the typical cash flow and expenses. From there, the lender will get a valuation on the property. The valuation may be a full commercial appraisal, a broker’s price opinion (BPO) from a real estate agent specializing in gas stations or automotive properties, their own internal valuation — or a combination of the three. After establishing the value, the hard money lender determines the loan amount and Loan-To-Value (LTV) they’re willing to fund.
Borrowers should understand the features of automotive and gas station hard money loans before seeking out this type of financing. Loan amounts, interest rates, duration and other loan terms differ from commercial mortgages.
Hard money loans are generally short-term, ranging from 12-36 months with a balloon payment due at maturity. As asset-backed loans, the interest rates and closing costs are higher than bank loans, with the loan amount based on the property value rather than the net operating income.
Hard money loan pricing is higher than institutional financing, including bank loans, SBA, or commercial mortgage-backed security (CMBS) programs.
An important fact to remember is that each hard money loan scenario has its own unique circumstances that dictate pricing. Some situations are difficult, such as a gas station owner who buys a new store with no money out-of-pocket using a cross-collateral blanket loan, tapping the equity from their current properties that happen to be out-of-state. This transaction’s high leverage and multiple moving parts bump up the price.
On the contrary, a real estate investor acquiring a multi-tenant automotive building through a 1031 exchange with an 80% down payment will have a lower pricing structure due to the minimal risk.
Below are general costs a borrower should expect when comparing terms for an automotive or gas station hard money loan:
There are several benefits and drawbacks of hard money loans for automotive and gas station properties.
To get a hard money bridge loan, it’s best to have all of your financial statements and property reports ready to send to a lender for underwriting.
I recommend you have these items ready:
FCTD has facilitated several hard money loans secured by gas stations and auto repair properties. We don’t specialize in this asset class — but have experience working with owner operators and real estate investors who own several of these properties. We’re experts in hard money and private money lending and have closed over $2.5 billion in private loans for investors. Some of our trust deed investors (lenders) own many gas stations and can quickly analyze the property to determine the property value, loan amount, and exit strategy. They’re very comfortable lending against gas stations and automotive buildings.
Conclusion
Automotive and gas station hard money loans can be a useful tool for business owners who need quick access to cash. Although they come with higher interest rates and shorter repayment terms than traditional loans, they offer the flexibility and accessibility that can be invaluable for borrowers in transition. Understanding the key features, terms and pricing of these loans is essential for making an informed decision when seeking financing for an automotive or gas station property. It’s important to note that while hard money loans have fewer barriers than traditional bank loans, borrowers must still meet certain qualifications and have a solid repayment plan in place.
At FCTD, we have extensive experience serving the gas station and automotive property sector, and can help provide this valuable financing option to borrowers who would benefit from the advantages of a hard money loan.
Jul 4, 2023 by Ted Spradlin
Gas station hard money loans are a type of short-term financing solution for gas station owners who may have challenges...
Jul 4, 2023 by Ted Spradlin
Automotive building hard money bridge loans can be a useful short-term financing option for owner-operators and real...