How Much Does It Cost to Open a Gas Station in California?
April 07, 2025 | Last Updated on: April 07, 2025
By Nick Perry
California has some of the highest gas prices in the country and despite global investments in green energy, the gas station industry continues to grow every year. Combined with the recession-proof popularity of convenience stores, gas stations can be an excellent business opportunity for savvy entrepreneurs.
Whether you want to build a new one or purchase an existing one, you may need a gas station loan in California.
In this article:
- Advantages and disadvantages of owning a gas station.
- How much does it cost to open a gas station in California.
- How to get a loan to buy a gas station in California or get a gas station construction loan in California.
Types of gas stations
When you think of a gas station, you might have a particular image in mind. Most gas stations in California follow a similar model of having pumps outside and a convenience store inside. While this is the most popular model, it’s not the only option.
For instance, some gas stations may offer a car wash, a service station, a tire shop, or a variety of other auto amenities. Figuring out the right vision for your business will also inform the type of loan you pursue and whether or not you want to buy an existing gas station business or construct something new.
Advantages of owning a gas station
There are several distinct advantages of owning a gas station in California, especially compared to other states.
Earning potential
Gas station owners can reap higher profits due to Californians’ general willingness to pay higher prices. (There’s also very limited public transportation in the Golden State, giving gas station owners another advantage.) Moreover, convenience stores have extraordinarily high margins, at up to 27.1%.
High earnings lead to more working capital, profits, and expansion potential to scale profits even more.
Convenience
Gas stations offer fairly inelastic services. Drivers need gas and car service, and people need to eat. California has more than 27 million licensed drivers, each of whom likely buys gas multiple times a month. There’s a reason you don’t see your local gas station advertising on TV. Gas stations have far fewer customer acquisition and marketing costs compared to many other types of businesses.
Disadvantages of owning a gas station
Like most types of businesses, there are also some drawbacks to owning a gas station.
Administrative work
Small business owners in any industry take on a lot of responsibility. When you open a gas station, you and your immediate partners will assume all of the bookkeeping, compliance, and operations responsibilities. Customers might pump their own gas, but you have to schedule tank refills, file taxes, and meet all of the compliance requirements necessary for your chosen business structure. If you hire employees, you’ll have to pay and file income taxes or risk audits by the state or IRS.
Licensing requirements
There are no formal licensing requirements in California to own a gas station as there may be for some other types of businesses.
That said, you should review any licenses and permits necessary to run a gas station because local regulations may differ from federal or state regulations. You’ll need a business license, but depending on the services offered, you may also need a health permit, occupancy certificates, or to meet certain zoning requirements. California also requires all gas station owners to get a fuel distribution permit, a fire safety permit, and a fuel storage permit.
Cost
We’ll get into this in greater detail below, but gas stations are very expensive to own and operate. The biggest reason for this is the high cost of gasoline and the need to buy it in huge quantities to sell to customers. Opening a gas station has enormous upfront costs, which means a gas station loan in California will be absolutely vital.
Whether you’re buying an existing gas station or starting a new one, you’ll likely need a significant amount of gas station financing. If interest rates are high, you may be looking at a very high monthly payment due to the substantial loan amount you’ll need to pay the startup costs.
Competition
By far the biggest drawback to owning a gas station is the existing competition. It doesn’t really matter how great your business plan is if there are too many gas stations in the area already. The most important part of opening a gas station in California is finding a location that’s underserved. While people need gas enough that several stations may thrive in close proximity to one another, there’s a fine balance where the competition may become so stiff you can’t afford to pay back your gas station loan in California.
How much does it cost to open a gas station?
According to Toast, the average cost to open a gas station is between $250,000 to multiple millions of dollars. In many parts of California, the cost is likely on the high end due to the market size and the high cost of living.
Most people will not be able to buy or build a gas station without a gas station loan in California. The costs may vary if you’re getting a loan to buy a gas station in California or getting a gas station construction loan in California.
Some startup costs to consider when preparing to open a gas station include:
- Licensing and permit costs
- Commercial real estate
- POS system
- Renovations
- Signage
- Gas and pumps
- Store inventory
- Service center equipment
- Employee costs
- New equipment financing
How to get the money to open a gas station
Opening a gas station in California is a very expensive venture, even if you plan to purchase an existing location. Nonetheless, there are loan options and financing solutions available.
Business term loans
A common form of startup funding is to secure a small business loan. Term loans are a traditional type of financing where the borrower receives a lump sum payment upfront and then repays the loan over time. These loans can provide the capital you need with repayment terms that fit your budget.
General business loans can be used for a variety of purposes, including:
- Startup costs
- Cash flow and working capital
- Operational expenses
- Equipment or real estate financing
- Marketing and advertising
- Supplies or inventory
- Staffing needs
- Franchising fees
Both secured and unsecured loans are offered by traditional banks and online lenders depending on the borrower’s creditworthiness. Getting business financing isn’t guaranteed, however. Any borrower will have to go through a loan application process and meet eligibility requirements. Loan approval is typically subject to a qualifying credit score, sufficient time in business, and financial statements like tax returns and bank statements.
SBA loans
The U.S. Small Business Administration works with lenders to offer several loan programs. SBA loans partially guarantee a percentage of the loan amount, lowering the risk to the lender and incentivizing them to approve loans. SBA loans tend to have strict qualification requirements, but if you qualify, you may enjoy very competitive loan terms. The most common loan program for new business owners is the SBA 7(a) loan.
If you want to get a gas station loan in California, you’ll need excellent credentials and likely have some cash available for a down payment.
Lines of credit
Revolving lines of credit offer compelling solutions for new gas station owners who need working capital when they’re just getting started. Two of the best options for revolving credit are business credit cards or a business line of credit.
With a business line of credit, a borrower is approved for a maximum loan amount. They can withdraw from this credit limit as long as it is available and only pay interest on the amount they withdraw. Once they repay the borrowed amount, plus interest, they’ll have access to the full loan amount again.
A business credit card works just like a personal credit card. Business owners can make purchases up to a preapproved limit and, as long as they pay back the credit, they’ll be able to access the full credit line when they need it.
Both of these options are good ways to build up your credit score. After getting a gas station loan in California, it will be important to keep your credit score in good shape and retain financial flexibility while you’re getting started.
Final thoughts
Opening a gas station can help you achieve financial independence and raise your earning potential. However, gas stations are very expensive to open, especially in a competitive business landscape like California. You may need a gas station loan in California. Fortunately, there are many gas station financing options available to qualified business owners.
FAQs on gas station loans
Do you need a gas station loan in California?
Gas stations cost an average of $250,000 or more to start. As such, you’ll almost definitely need a gas station loan in California to start your gas station. However, this will vary depending on each individual situation.
What are the requirements in California to open a gas station?
To open a gas station in California, you’ll need these permits and licenses:
- Business license
- Fuel distribution permit
- Fire safety permit
- Fuel storage permit
- Zoning permits
- Compliance with state and local environmental regulations
What kind of gas station financing is available in California?
Some of the most common ways new business owners fund new business in the Golden State are with small business term loans, SBA loans, or revolving lines of credit.
Is it cheaper to buy or to build a gas station in California?
While some franchise arrangements may make it more affordable to build a new gas station with funding from a franchiser, it’s usually much more affordable to buy an existing gas station rather than build it from the ground up. However, this will vary depending on each individual situation.
