SBA 504 Gas Station Feasibility Study

Cancellation is the 504 gas station signal

The 504 program approved 954 gas station loans from FY2017 to FY2026, $1.06 billion in gross dollars. Cancellation is what sets this record apart. At least 19.8% of FY2017 to FY2024 station approvals were later cancelled, and the figure climbs to 24.6% if every approval still undisbursed is counted as cancelled too. That is higher than the gas station rate in 7(a), and it also clears our distinctness margin against 504 lending for every class combined. A borrower entering a 504 station deal should plan on the real chance that an approval does not reach closing.

The median loan is $860,000 and the middle half runs from $410,250 to $1.6 million. Unlike most 504 classes, the 504 median here sits below the gas station median across both programs; the 7(a) station median is the higher of the two. Brands matter here more than in almost any other 504 class, with 58.9% of the loans going to franchised stations, so fuel supply agreements and convenience store franchise terms belong in the underwriting file. The Mortgage Capital Development Corporation tops the station lender table with 74 loans worth $133.1 million; WBD, Inc. has 49 worth $33.7 million, Granite State Economic Development Corporation 45, Florida Business Development Corporation 40 and Advantage Certified Development Corporation 31 worth $72.1 million. California dominates the map with 244 loans, far ahead of Texas at 61, Georgia at 50, Wisconsin at 46 and Florida at 40.

Late losses and what to test

Funded stations show a charge-off floor of 0.85% on 355 loans disbursed from FY2017 to FY2021, yet 0.00% of those stations were written off inside their first five years, so the losses this cohort has recorded arrived later in the life of the loan. For a lender that argues for testing the station well past its opening years. A feasibility study under 504 has to show demand from traffic counts, access and turning movements, the competing stations on the same corridor, and the inside sales a store can add to fuel margin. It has to cost tanks, dispensers, the canopy and the store, and price the environmental work, since a tank site can carry contamination that stops a closing. Debt service coverage should rest on inside sales and fuel volume tested at thin margins, not on a single strong year. The appraisal will treat the station as a special-purpose property valued with its business, and the study has to support that income. On the data: the class is coded by the borrower's industry, travel centers and truck stops are folded in with stations that have no store, and the 2022 NAICS index has no entry at all for EV charging.