All Topics / Finance / Finance for a Service Station

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  • Profile photo of amazon196969amazon196969
    Participant
    @amazon196969
    Join Date: 2004
    Post Count: 15

    Hi All
    I am interested in purchasing a service station in a remote area of WA.
    The advise I have received is the banks conditions are 50% deposit and depending on the turnover as to what the rate will be. I don't understand as why this is.
    While my partner and I have enough property between us to do this we don't feel comfortable if things don't go to plan, although I am 100% sure it will do better than the vendors figures show, as there is much room for improvement and this town is not suffering from the financial crisis. 
    Any ideas on any other financial lenders who would not require 50% deposit?
    Thank you all in advance.
    Kylie

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    50% Lvr in the current climate is a good loan to valuation for such as specialised security.

    Richard Taylor | Australia's leading private lender

    Profile photo of Investment-MortgagesInvestment-Mortgages
    Member
    @investment-mortgages
    Join Date: 2009
    Post Count: 32

    Yes depending on the location the banks generally view this as medium to high risk,
    hense the rubbish LVR.  Remember to have a well documented business plan (even written out by your accountant preferably)
    when you approach the bank. If you have other past businesses that have kicked goals this will weigh up for you also(add these in).
    Approach the bank as professionally as possible with a stack of evidence why they should lend to you(and ask for the highest lvr you think is possible).

    These cases(im fairly sure) go straight to the banks credit managers so a human has a big deciding factor, not like a standard
    home loan which is all computer generated lvrs etc…..

    Profile photo of Investment-MortgagesInvestment-Mortgages
    Member
    @investment-mortgages
    Join Date: 2009
    Post Count: 32

    Also you mention you have property, maybe drawing equity from them is cheaper in the long run,
    Higher LVR's, Line of credit etc…..(proving income now for loans while you don't own the station now could be an idea assuming you have a stable income stream now?) then the money is yours to go ahead with your venture?

    Profile photo of crjcrj
    Participant
    @crj
    Join Date: 2004
    Post Count: 618
    amazon196969 wrote:
    Hi All
    I
    While my partner and I have enough property between us to do this we don't feel comfortable if things don't go to plan, although I am 100% sure it will do better than the vendors figures show, as there is much room for improvement and this town is not suffering from the financial crisis. 

    If you don't feel comfortable if things don't go to plan, bear in mind that the lender will have personal guarantees etc from you so your other assets can be at risk if it goes pear-shaped.

    What is your exit strategy?  If it's remote you might have a great deal of difficulty selling.  If it's a mining town that will also affect your ability to obtain mechanics etc.

    Unless you understand the town well, there might be factors affecting turnover/profitability eg employees vehicles might get filled at work or there is acontract with another fuel supplier or a contract with your petrol supplier fixing the rate that you get for certain customers.

    Don't get me wrong I think there are great opportunities to make money in remote parts of Australia, but they are remote because people like their comforts

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