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SBA & USDA Lending Data and Market Intelligence
SBA Feasibility Study for a Gas Station: What the Lender Tests, and Two Worked Engagements
A gas station is three businesses sharing a parcel: a fuel retailer earning cents on the gallon, a convenience store earning a third of the ticket, and often a car wash or food service earning most of what it takes in. Each has a different margin, a different fixed cost load, and a different failure mode. The SBA feasibility study exists to tell a lender which of the three is carrying the debt, and what happens to coverage when the one carrying it underperforms.
What the SBA Loan Tape Shows About Gas Station Lending
Computed by Loan Analytics from the SBA 7(a) and 504 loan-level FOIA files, March 31, 2026 release, covering fiscal 2020 through the first half of fiscal 2026, net of cancellations, across NAICS 447110, 447190, 457110 and 457120.
SBA 7(a) loans: 3,530, totalling $5.57 billion Average 7(a) loan: $1.58 million SBA 504 debentures: 1,704, totalling $1.49 billion Average 504 debenture: $875,000 Median term: 300 months Average initial rate: 7.44 percent Start-ups and businesses under two years: 33.8 percent of loans Change of ownership: 33.8 percent of dollars
Approvals by fiscal year: 517 loans and $746 million in 2020, 804 and $1.20 billion in 2021, 476 and $744 million in 2022, 437 and $743 million in 2023, 500 and $777 million in 2024, 556 and $916 million in 2025, and 240 and $446 million through March 2026. The class recovered through 2024 and 2025 after the post-2021 correction, and fiscal 2026 is tracking to its strongest count since 2021.
Where the lending is. California leads at $1.33 billion across 585 loans, Texas follows at $1.25 billion across 705 loans, and Washington is third at $791 million across 345. Washington is the anomaly worth noting: a state with roughly two percent of the national population carries fourteen percent of SBA gas station dollars, a concentration driven by independent operators and a dealer network that has stayed fragmented where other states consolidated. Georgia follows at $402 million, then Illinois at $182 million and Oregon at $157 million.
Who lends. Celtic Bank Corporation leads with 260 loans for $590 million, then Readycap Lending at $370 million, Wallis Bank at $300 million and Open Bank at $270 million. This is a specialist lending market. The four largest originators are not the four largest banks, and a study written for a generalist credit desk will miss the questions a specialist asks.
Performance. On the seasoned fiscal 2010 to 2019 origination cohort, 4,691 gas station 7(a) loans have resolved. The charge-off rate is 3.43 percent by count and 1.06 percent by dollar, against all-industry figures of 7.30 percent and 3.34 percent on the same basis. That is the highest count rate of the special-purpose classes we track and still less than half the all-industry rate, and under a third by dollar. Fuel sites fail more often than hotels or storage, and when they fail there is more left to recover.
Why an SBA Lender Orders a Study, and Why the Environmental File Comes First
Gas stations sit on the SOP's limited and special purpose property list, which means a going-concern appraisal by an industry-experienced appraiser with value allocated separately to land, improvements, equipment and intangibles, and a 504 borrower contribution of 15 percent for the special-purpose property, rising to 20 percent where the borrower is also a new business. SOP 50 10 8 also carries dedicated gas station requirements in its own appendix.
But the practical order of work on a fuel site is different from every other asset class, and a study that ignores it wastes the sponsor's money.
The tank record decides the loan before the credit memo does. Underground storage tanks are regulated by state agencies under the federal UST programme, and a site with a historical release, an open case, or incomplete records can be uninsurable, unfinanceable, or financeable only with a cost-to-cure escrow that changes the cost basis. A Phase I environmental site assessment is standard, a Phase II follows on any recognised environmental condition, and on an older site the honest sequence is environmental first, feasibility second. We tell sponsors this before scoping, because a feasibility study on a site that cannot clear its environmental file is an expensive way to learn the loan was never available.
Branded fuel brings a franchise agreement. Where the site operates under a brand, the supply agreement, the image requirements and any brand-mandated upgrade programme sit inside the cost basis and inside the operating projection. SOP 50 10 8 restored franchise review, so the agreement is also an eligibility document.
Fuel margin is not a market rate. Unlike hotel ADR or storage street rate, fuel margin is set by the interaction of rack price, brand supply terms, and local competition, and it moves. A study that models a single margin assumption for five years has not modelled the business.
Worked Engagement One: Ground-Up, SBA 504
The program parameters below are the current rules. The project inputs are a composite drawn from the way these deals are structured, chosen to demonstrate the analysis at the depth an underwriter reviews it.
The project. A ground-up branded fuel and convenience site on 1.5 acres in a suburban Georgia corridor: 5,000 SF store with a food service programme, eight multi-product dispensers giving sixteen fueling positions, and one in-bay automatic car wash. Sponsor has operated two sites under management but is a new business as the borrower, so the 504 equity requirement is 20 percent.
The construction cost build-up:
Land, 1.5 acres: $650,000
Site work, paving, drainage and utilities: $780,000
Store building, 5,000 SF: $1,425,000
Fuel system: tanks, lines, dispensers and canopy: $1,150,000 I
n-bay automatic car wash: $385,000
FF&E: coolers, shelving,
POS and food service equipment: $525,000
Soft costs: design, permits, legal and financing: $340,000
Contingency, 7 percent of hard cost: $262,000
Working capital and opening inventory: $310,000
TOTAL PROJECT COST: $5,827,000
Two lines in that build-up carry more risk than their size suggests. The fuel system at $1,150,000 is the line most exposed to schedule: tank delivery, dispenser lead times and the state UST installation permit all sit on the critical path, and none of them are within the general contractor's control. And the $310,000 of working capital and opening inventory is not a soft number. A fuel site carries inventory in the ground and on the shelf from day one, and the sponsor who funds the build but not the fill opens undercapitalised.
The revenue and gross profit build:
Fuel is sold at a margin measured in cents, so the coverage analysis runs on gross profit rather than revenue. Reporting a gas station's top line without its margin structure tells a lender nothing.
Fuel: 2,300,000 gallons at an average $3.15 retail equals $7,245,000 in revenue, at a $0.36 blended margin equals gross profit of $828,000
Inside sales: $2,200,000 in revenue at a 33 percent margin equals gross profit of $726,000
Food service: $640,000 in revenue at a 56 percent margin equals gross profit of $358,400
Car wash: 34,000 washes at $9 equals $306,000 in revenue, at an 85 percent margin equals gross profit of $260,100
Other: lottery commission, ATM and air: $82,000
TOTAL REVENUE: $10,473,000 TOTAL GROSS PROFIT: $2,254,500
Gross profit is 21.5 percent of revenue. That ratio is the single most useful number on the page for a lender who has not underwritten fuel before, because a site doing $10 million in sales is not a $10 million business.
The operating expense structure:
Payroll and benefits: $680,000
Credit card and payment processing fees, 2.1 percent of sales: $219,900
Utilities: $162,000
Repairs and maintenance: $84,000 Insurance, including environmental liability: $92,000
Real estate and personal property taxes: $98,000
Environmental compliance, tank monitoring and testing: $28,000
Brand fees and marketing: $74,000
Administrative and general: $64,000
Management fee: $58,000
Replacement reserve: $40,000
TOTAL OPERATING EXPENSES: $1,599,900
Three observations an underwriter should take from that list.
Card fees are the second largest line and they scale with revenue, not with profit. At 2.1 percent of $10.5 million in sales, processing costs $219,900 against fuel gross profit of $828,000. When fuel prices rise, card fees rise with the top line while margin per gallon does not, which is why a fuel site can be squeezed by a rising oil price even though its unit economics have not changed. Any projection that models card fees as a percentage of gross profit rather than of sales is wrong in the direction that flatters the borrower.
Payroll is fixed against volume. A site with sixteen fueling positions and a food programme needs the same staffing at 1.9 million gallons as at 2.3 million. Roughly $1,100,000 of the $1,599,900 does not move with volume, which is what makes the downside cases below behave as they do.
Environmental compliance is a permanent operating line, not a closing cost. Tank monitoring, testing, reporting and the environmental component of the insurance premium run about $120,000 a year combined here. Owner-operator projections routinely omit both.
NET OPERATING INCOME: $2,254,500 less $1,599,900 equals $654,600
The financing structure and the coverage test:
Conventional bank first lien, 50 percent: $2,913,500
CDC debenture, SBA guaranteed, 30 percent: $1,748,100
Borrower equity, 20 percent: $1,165,400
TOTAL PROJECT: $5,827,000
Bank first lien debt service. $2,913,500 at 7.75 percent on a 25-year amortization. With a monthly rate of 0.0064583 over 300 payments, the monthly payment is approximately $22,010, or about $264,100 per year.
CDC debenture debt service. $1,748,100 at 6.40 percent on a 25-year term. With a monthly rate of 0.0053333 over 300 payments, the monthly payment is approximately $11,694, or about $140,300 per year.
TOTAL ANNUAL DEBT SERVICE: $404,400
DEBT SERVICE COVERAGE RATIO: $654,600 divided by $404,400 equals approximately 1.62x
That is a comfortable stabilized figure. It is also the least informative number in this study, for the reason the next two sections give.
The ramp:
Year one, at 75 percent of stabilized volume: gross profit $1,690,900, operating expenses $1,484,000, net operating income $206,900, debt service coverage 0.51x
Year two, at 90 percent: gross profit $2,029,250, operating expenses $1,545,000, net operating income $484,300, debt service coverage 1.20x
Year three, stabilized: gross profit $2,254,500, operating expenses $1,599,900, net operating income $654,600, debt service coverage 1.62x
Year one covers roughly half its debt service, a shortfall of $197,500. The $310,000 of working capital and inventory funds that gap and the opening fill, which is the reason it is sized where it is. A new fuel site builds its volume by taking trips from established competitors, and that takes eighteen to thirty months in a suburban corridor. A study showing only the stabilized year has concealed the period in which the loan is actually at risk.
Sensitivity:
Base case, stabilized: net operating income $654,600 against debt service of $404,400, coverage 1.62x
Fuel margin at $0.28 instead of $0.36: net operating income $470,600, coverage 1.16x
Volume 17 percent below projection, with inside sales falling proportionally: net operating income $374,300, coverage 0.93x Construction cost 10 percent over budget: debt service rises to $444,900, coverage 1.47x
Bank lien rate 100 basis points higher: debt service rises to $427,700, coverage 1.53x
Fuel margin at $0.28 and cost 10 percent over: net operating income $470,600 against debt service of $444,900, coverage 1.06x
Read that list and the risk profile is unmistakable. A rate move barely touches it. A cost overrun takes it from 1.62x to 1.47x, still comfortable. But eight cents of fuel margin costs forty-six basis points of coverage, and a volume shortfall that a lender would describe as a slow ramp rather than a failure takes the project below 1.0x.
That is the finding. This project is not sensitive to interest rates or construction cost. It is sensitive to whether the corridor delivers the traffic, and to a margin the operator does not set. The mitigants follow directly: a supply agreement with defined margin support, pre-opening traffic counts verified rather than accepted, more equity to reduce the debt, or a phased approach that opens without the car wash and adds it from operations.
Worked Engagement Two: Acquisition, and the Threshold That Decides the Quality of Earnings Report
From 1 October 2026, SOP 50 10 8.1 requires a lender-ordered Quality of Earnings report on an Initial Acquisition where the Business Purchase Price is $3 million or more, and requires coverage of 1.25x measured on historical earnings, with projections reviewed but not usable to clear the floor. Change of ownership is 33.8 percent of gas station dollars, so this applies to a third of the market.
The definition matters more than the threshold, and almost nobody has noticed why.
The project. An existing branded site acquired at a purchase price of $4,600,000, with the real estate appraised at $1,400,000.
Business Purchase Price is the purchase-agreement price less the appraised value of any owner-occupied commercial real estate included in the deal. Here that is $4,600,000 less $1,400,000, or $3,200,000. Above the threshold, so a Quality of Earnings report is required.
Now change one input. Suppose the going-concern appraisal allocates $1,700,000 to the real estate rather than $1,400,000. The Business Purchase Price becomes $2,900,000, and no Quality of Earnings report is required.
The appraiser's allocation between real property and business value decides whether the lender must commission a third report. That allocation is a contestable professional judgment, with two accepted methods that can produce materially different splits on the same asset. On a fuel site, where the tanks, canopy and dispensers can be treated as real property or as equipment depending on the approach, the swing is wide enough to cross a $3 million line routinely. Lenders underwriting gas station acquisitions in the first quarter after 1 October should expect this to surface, and should decide in advance how they will handle a file that sits within a few hundred thousand dollars of the threshold.
The coverage arithmetic. The loan is a 7(a) of $4,140,000 after a 10 percent injection, at 10.5 percent on a 25-year amortization, giving annual debt service of approximately $469,100.
On the seller's reported EBITDA of $720,000: coverage is 1.53x On adjusted EBITDA of $625,000 after the Quality of Earnings disallows $95,000 of add-backs: coverage is 1.33x, still clearing the 1.25x floor If the report had disallowed $160,000, leaving $560,000: coverage is 1.19x, below the floor
In that third case the SOP's instruction is not to find a projection that rescues the ratio. It is to reduce the loan. At 1.25x the maximum supportable debt service is $448,000, which supports a loan of roughly $3,953,000, cutting $187,000 from the request and requiring the buyer to find it elsewhere.
That is the mechanism by which a valuation judgment now sizes a gas station loan.
What the Study Concluded
On the ground-up project: feasible, with conditions. Stabilized coverage is strong, but the project is exposed to fuel margin and to traffic delivery rather than to rates or cost, and a routine combined downside lands at 1.06x. The recommendation carried three conditions: working capital sized to the modelled year-one shortfall, verified traffic counts at the specific access points rather than corridor averages, and a supply agreement reviewed for margin support before closing.
On the acquisition: feasible at the adjusted earnings figure, with the observation that the file sat close enough to the Quality of Earnings threshold that the appraisal allocation should be settled before the report is commissioned rather than after.
Our gas station feasibility study service page sets out scope, timeline and fees for this kind of engagement.
SBA Feasibility Study for a Gas Station: FAQ
Does the SBA require a feasibility study for a gas station?
Not by rule. SOP 50 10 8 leaves the decision with the lender and SOP 50 10 8.1 does not change that. In practice lenders order one on most fuel sites, because the asset is special purpose, the collateral has limited alternative use, and repayment depends on volume and margin assumptions a credit desk cannot verify without analysis.
What comes first, the environmental report or the feasibility study?
The environmental report, on any site with existing tanks or a prior fuel use. A recognised environmental condition can make the loan unavailable at any price, and there is no purpose in modelling a business on a site that cannot clear its Phase I.
What debt service coverage ratio does a gas station need?
Lenders and CDCs generally underwrite to 1.15x to 1.25x, with a mandatory 1.10x floor on 7(a) Small Loans at or below $350,000. From 1 October 2026 an acquisition must clear 1.25x on historical earnings. The more useful question is coverage under a margin shock, because fuel margin is the variable that moves.
How much equity does a 504 gas station project require?
Fifteen percent for the special-purpose property, rising to 20 percent where the borrower is also a new business. Most ground-up fuel sponsors fall into the second case.
What operating expense lines do owner-operator projections usually miss?
Environmental compliance and monitoring, the environmental component of the insurance premium, a management fee where the owner works the site, and a replacement reserve. Together these commonly run 2 to 3 percent of revenue and are omitted more often than not.
When does the new Quality of Earnings requirement apply to a gas station acquisition?
Where the Business Purchase Price, meaning the purchase price less the appraised value of the owner-occupied real estate, is $3 million or more, on applications receiving an SBA loan number on or after 1 October 2026. Because the real estate allocation is a professional judgment, deals near the threshold can fall either side of it depending on the appraisal.
Can a gas station be financed under USDA?
Where the site is in an eligible rural area, yes, under Business and Industry, and the program maximum is well above the 7(a) cap. Eligibility is confirmed address by address. The five-component analysis under 7 CFR Part 5001 is a different structure from an SBA study although the analytical core is the same.
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