Truck Stop Financing – You’re in Luck Again

Truck stops have always been difficult to finance. Gas stations and convenience stores have never been embraced by the banking community but truck stops are even more problematic. Truck stops, like gas stations and convenience stores, are not desirable to many lenders because of its single use nature. They also depreciate faster than most types of commercial properties in case of foreclosure and are much more difficult to sell than a gas station or convenience store due to the lack of qualified operators that can borrow money. Many of the larger transactions have not and do not have access to government backed financing (SBA and Rural Development) because the size of the loan is too large or the net worth of the borrowing entity is also too large.In 2008, the SBA enacted measures that made it virtually impossible for truck stop financing. It was required for ALL purchases for a seller to provide an environmental indemnification agreement (regardless if there had ever been an environmental issue). It was also required that a Phase II environmental be done on all sites over five years. The SBA also required a separate business valuation be done in addition to an appraisal. Most sellers (and rightfully so) refused to sign indemnification agreements, which only made sense if they owned a property that had an environmental issue.
 
Because of severe economic downturns in the economy at the end of 2008 and beginning of 2009, petroleum lending ground to a virtual halt. Lenders were more concerned about preserving capital than lending capital. In addition, the secondary market was non-existent for SBA. Prime was at an all time low and companies that traditionally paid for these loans could not make a profit on them because of the low rates. Most lenders count on a secondary market to sell loans to and only to have to service the loans. Only the much larger banks could do these loans and keep them in their own portfolio.
 
The credit market is definitely thawing again. The SBA on March 1 reversed some earlier enacted policies that made doing truck stop financing prohibitive. The SBA no longer will require an indemnification agreement from sellers (unless there is a current environmental issue). The SBA also will no longer require Phase II environmentals to be done on a property unless there is an open file on the site where an environmental issue has either been identified, or the site is currently in remediation or is being monitored.
 
The SBA guarantee fee has also been waived approximately until the end of 2009. This will make it an even more attractive option as it was one of the main reasons people did not choose SBA financing. 
 
The Obama administration is freeing funds to make the secondary market viable again. SBA lending has increased significantly the second quarter of 2009. While SBA financing is not an option for the larger truck stop / travel plaza loans, it will be appropriate in the $5,000,000 and under loans in many instances. SBA 504 loan guidelines are also changing in the second quarter of 2009. For the first time, borrowers will be able to refinance their loan with an SBA 504 loan. While the policies and guidelines have not been finalized, this will certainly be an option for some borrowers for truck stop financing.
 
Regardless of which type of financing a borrower may pursue, make sure that they deal with entities that have a fundamental knowledge of the petroleum industry, specifically truck stops and travel plazas and have a long track record in commercial lending.