Gas Station Payback Calculator

What it computes, and the formulas

The calculator builds a year's revenue from the gas station lines below, takes off the operating expenses, and sets the net operating income against the loan: the coverage a lender reads, the cash left after the payments, and the years the project and the equity take to pay back. A break-even line shows how far revenue can fall before the cash flow after debt service reaches zero.

• Revenue: the sum of the lines. Fuel gross profit = gallons sold × margin per gallon; Store gross profit = inside sales × inside gross margin; Other income = as entered.
• Operating expenses: E = revenue × the share that rises with revenue + fixed expenses.
• Net operating income: NOI = revenue − E.
• Monthly payment on a loan L: P = L × r ÷ (1 − (1 + r)⁻ⁿ), with r = annual interest rate ÷ 12 and n = amortization in years × 12 (at a zero rate, P = L ÷ n). Annual debt service: D = 12 × P.
• Debt service coverage: NOI ÷ D. Cash flow after debt service: CF = NOI − D.
• Equity: total project cost − L.
• Simple payback on the project cost: total project cost ÷ NOI, in years.
• Payback on the equity: equity ÷ CF, in years. Cash-on-cash return: CF ÷ equity.
• Break-even revenue: (fixed expenses + D) ÷ (1 − the share that rises with revenue). Revenue cushion: 1 − break-even revenue ÷ revenue.

A payback that never arrives, because the net operating income or the cash flow after debt service is not positive, reads "never at these inputs". For coverage and the largest loan the cash flow carries, use the DSCR and Loan Sizing Calculator.

Entering a gas station project

Enter the station as its books show it. Fuel goes in at its margin per gallon, because the pump price passes through the cost of the fuel and the taxes on it, and inside sales go in at their gross margin. The revenue line is therefore gross profit, and the share of operating expenses that rises with revenue is a share of that gross profit: card processing and store supplies are the usual entries.

Fuel margins move with wholesale prices from month to month, so a study tests the station at a lower margin than the recent average. Underground tanks, canopy and dispensers are capital costs, and an environmental review of the site is outside this arithmetic.

What it does not do

• An estimate, not a feasibility study: it takes your revenue and costs as given and tests none of them against a market, a trade area or the competition.
• Not an appraisal: it states no value for the property or the business.
• Not lending advice: a lender sizes a loan on its own credit policy, its program's rules and its own reading of the cash flow.
• One stabilized year, undiscounted: no ramp-up, no growth in prices or costs, no inflation, no income tax, no depreciation, no sale and no change in value. Payback counts years of that steady cash flow, and a later dollar counts the same as a dollar today.
• One loan, fully amortizing in equal monthly payments at a fixed rate: no interest-only period, balloon, fees or second lien. An SBA 504 project carries two liens, and its coverage is tested on both payments together.

The method behind these tests is set out in the methodology series: Sensitivity and Stress Testing: Break-Even Points, Shock Sizes and What a Lender Should See.