help with buying a petrol station

[Chris Layton]

Hi,

Im very new to the forum and need some help..

I have been working as a Store Manager for a Supermarket for a number of years but I am now wanting to buy my own store, (make the money for myself instead of shareholders....) and have found a small Petrol Forecourt that is for sale.

I am fully aware of all the day-to-day bits involved with running a store and team etc that goes with it - that side of things isn't an issue at all.

I am confident that I can run the business I have already researched a symbol group to use for purchase and branding the food side of things and have looked at a fuel supplier already.

The forecourt I have found is listed at £130,000. It is a leasehold site - I am enquiring about the freehold as potentially the site could do with a knock down rebuild with a much larger food store offering - there is space on the site to do this and the food sales are where the profits will be made. Fuel is just a reason to get customers in the door.

Currently store turnover is £650,000 with net profit of £60,000 -this still needs to be checked but I have not yet had access to the accounts.

My main area of concern is around the funding for this. I am not a homeowner and I don't have any significant capital that I can put in. My family are also not in a position to help with this either.
If, once I have checked the accounts etc and done all of my research, I can produce a viable business plan that will show the business is able to repay any loans etc is there any way of getting a 100% loan to purchase and set up the business?
At £60k profit, taking half of that for repayment I can clear the £130k plus interest in less than 10 years.

Would there be more chance if I was able to buy the leasehold so that the bank can then use this as security?

If I was able to get the freehold would a bank invest in me to do a knock down rebuild, again if I produce a solid business plan and they would have the store itself as security?

Any help/advice someone could give me would be really helpful, Like I say I am confident I can run the business fine and make the profit to be able to repay everything - I just need the help getting set up!

Thanks

 

[Mark T Jones]

Cutting to the chase, it’s a big fat no I’m afraid.

 

[Chris Layton]

So how would I go about getting the finance for this?

There is lots of independent shops around - Did they all really start of with a couple of Hundred thousand in the bank?!

 

[Mr D]

Most shops start with leasehold, renting the shop. Some people set up using redundancy money, inheritance or simply start small and work up - some of the big name companies started with a single spot on a market or a single shop.
A number of business owners have risked their homes, using their own equity to pump start a business.

Around my area I could take on an empty shop for setup costs of just a few thousand and a mere £500 a month rent. Affordable and capable of growing the company.

Try something smaller, a small retail shop business can be purchased for a fraction of what you want to take on.
Then later expand to that if you still wish.

The problem for any lender is that businesses can go under. So if you go under owing the bank £120k they have virtually nothing - a personal guarantee doesn't count for a lot if you don't have a house they can seize.
Banks prefer less risky loans.

 

[Mark T Jones]

So how would I go about getting the finance for this?

There is lots of independent shops around - Did they all really start of with a couple of Hundred thousand in the bank?!

What they will have started with is

- Some evidence of ability to repay
- A wodge of cash as deposit
- Collateral to use as secondary security

 

[Toby Willows]

There’s no such thing as a “solid business plan” for a startup. When you need capital to purchase garage number twenty then you stand a chance of producing a viable business plan.

As others have said, start small. Running your own shop is a million miles away from managing a multinational branch with all their cash, experience, contacts, buying power and expertise.

 

[Gordon - Commercial Finance]

Yeah sorry its not going to happen for you just now. All you can do is try and save up a bit of capital. No lender is going to give you 100%.

 

[tony84]

The issue is not that you need finance, the issue is that you are putting nothing in - or nothing significant. Realistically you will need around 25%.

 

[LiveNetworks Ltd]

I can see value in the numbers you've got, but the key to buying the lease will be what's left on the lease? No point in having a business plan to repay any loan over 10 years if the freeholder is only giving you a 5 year lease! (and bear in mind any value in the business after 10 years will be subject to having a lease that you can sell on! Very easy for a freeholder to pull the rug out from under you.)

 

[Mark T Jones]

The issue is not that you need finance, the issue is that you are putting nothing in - or nothing significant. Realistically you will need around 25%.

There’s slightly more to it - lenders will all have affordability criteria.

 

[tony84]

There’s slightly more to it - lenders will all have affordability criteria.

Agreed but there is no point in spending time looking at that if you have no money to put down.

 

[Chris Layton]

Thanks for everyone's help - Whilst the business I was looking at still looks like a fantastic opportunity, having looked in to things a lot more, if seems - As I thought - my plans were far too ambitious for a start up with no money to put in!

So following the advice above I have looked for something of a small project to get things started and found a cracking little "Village Shop" type business for Sale. It is only a small shop, something you would run on your own, or with a couple of part time staff to help cover the opening hours, but it has some great potential and the asking price is £15,000 with a £8000 p /a lease. Whilst not yet verified the accounts show a profit of about £40,000 - before current owners salary as is operated as a sole trader), so whilst nothing massive could be an ideal starting point.

In terms of funding, there was no chance of getting the funding for my original plan of buying the petrol station, however I have found there is a Government Scheme for start up business that offer up to £25,000, repayable over up to 5 years. Having spoken with them and done an initial checks etc this looks like it could be a option for me.
£25,000 would be enough to cover the purchase of the business, purchase of the stock and cover the first quarters rent, and I have a small amount of savings, that if needed would cover my essential living costs for about 3 - 4 months.

I have lots still to do (as Im sure someone will point out!) before this gets anywhere nearing going but it does seem to be something worth looking at.

My next question is has anyone else every used the Government Scheme, Is there anything that I should be weary of? (other than owing them a load of money!!!)

 

[Mark T Jones]

I’ve worked with the scheme

There’s noth8ng to be wary of. There’s quite a lot of admin. They will want to see a well thought through business plan and a reasonable credit history

They will give you a mentor to help (but not to do it for you)

 

[Mr D]

Sounds like a much more affordable and to be honest for the time involved may well be a more profitable deal.
Double check everything the seller or their agent claims - they are not on your side and not working for you. They may be giving you exact figures and telling the truth. Or they may be glossing over a figure, a problem, an expected change.
So check everything.