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Convenience Store Financing

If you are considering opening a convenience store – also known as a c-store – and need a convenience store loan, you are in good company.

Convenience stores are a thriving business, continuing to see amazing growth over an extended period of time.

Loans for Convenience Stores

A convenience store is roughly defined as a retail establishment that stocks a variety of everyday items such as snacks, beverages, newspapers and magazines, tobacco products, beer, groceries, and other common household items.

Today’s convenience stores fulfill on-the-go needs. Convenience stores give customers a faster alternative to supermarkets and chain drug stores when they need to make a single-item purchase, one that is generally consumed immediately.

Convenience store location is perhaps the most important factor of the term “convenience.” Extended hours of operation and quick transactions are also important. But as in all retailing, location is number 1. You can routinely find convenience stores at suburban intersections, on highways, in and around travel hubs, or near densely populated work areas such as industrial and office parks.

Almost 80% of convenience stores offer motor fuel (which accounted for 50% of total convenience store sales in 2015) and, c-stores also commonly partner with popular fast-food franchises to create dynamic, convenient one-stop refreshment hubs.

Size of the Convenience Store Marketplace in the United States

The National Association of Convenience Stores (NACS) reported approximately 154,958 c-stores accounting for $550 billion in 2017 annual sales. This most recent report, conducted by NACS/Nielsen Convenience Industry Store Count, represents a 0.3% increase in store count from the prior year.

While franchise operators of c-stores like 7-Eleven and Circle K are the most well-known, single-store operators account for 63% (97,643) of the total convenience store count in the United States.

Individual Store Growth Stays Strong

Source: Statista

While the convenience store count growth is slowing somewhat, their product sales continue to grow at a robust pace. That’s great news for anyone starting a new convenience store or buying an existing store or franchise. The average revenue per convenience store in the United States has climbed to almost $1.5 million annually.

Growth Areas Abound For Convenience Stores

In addition to selling ready-to-use consumer products, convenience stores also offer services like money transfers, phone cards, and limited-use cellular phone plans. Lottery ticket sales help to increase the convenience store revenue base as well. However, sales are dominated by tobacco products, packaged beverages, beer and malt beverages, and snacks.

It is hard to ignore the dominance of tobacco products as c-stores’ overwhelming sales driver. One of the biggest growth areas for convenience stores is the vaping marketplace and electronic cigarettes. These products carry relatively high price points; stocking up can be very costly.

Source: Statista

Risks Associated With Convenience Stores

Since many convenience stores are located in high traffic areas and may hold significant amounts of cash, they are susceptible to higher-than-usual levels of theft and fraud.

In addition, there are stringent regulations associated with the sale of tobacco products, alcoholic beverages, and lottery tickets. Failing to adhere to these regulations could result in fines, revocation of licenses, criminal liability, or a combination of these. It is important to be aware of the responsibilities associated with selling these items, and to maintain the proper insurances in the event that your employees do not comply or commit fraud.

Finally, since many convenience stores sell perishable food items, convenience stores must follow local health department regulations and carefully manage preparations and inventory to avoid losses due to spoilage. Most convenience store operators have learned how to manage spoilage, but for a new operator, this could represent additional and significant costs.

Getting a Loan for a Convenience Store

While the growth figures for convenience stores are promising, the reality is that traditional bank loans are very difficult to obtain. Despite the fact that banks are still the leading source of business loans, they approve only about 25% of all loan requests. It’s a competitive borrowing landscape for small businesses. Trying to finance your convenience store through a traditional bank loan is possible, but is won’t be easy.

If you find yourself among the 75% of all businesses locked out of a traditional bank loan, where can you find the money you need to finance your new convenience store?

Compared to just 10 years ago, there are now many more non-bank lenders and loan programs for convenience stores. Remember, banks are regulated and have to follow strict underwriting guidelines. So just because a bank won’t lend you money does not mean you won’t qualify for a business loan; you just need to know where to look.

How to Tell If You Need Convenience Store Financing

This Debt Service Coverage Ratio Calculator (DSCR) will help you understand how a lender will look at your request for a convenience store loan. Basically, your DSCR calculates your ability to repay your loan. This is important for the lender, but also important for you – especially before you purchase a business. Take a moment to see a more detailed description of debt service coverage ratio.

Top 4 Financing Solutions For Convenience Store Acquisitions

Acquiring an already-established business may offer a significant advantage in applying for a convenience store loan. If the convenience store is profitable, that may be just the proof your lender needs to justify making you a loan. After all, if a business has a track record of profitability in a growing industry, making a loan to that business means it has a high chance of being repaid on time.

  • Small Business Administration (SBA) Financing

    This is top-tier financing. The SBA itself doesn’t issue these loans; it guarantees them for its partner lenders. They offer the most favorable rates and terms for borrowers seeking term loan financing. The SBA can guarantee up to 85% of a loan, allowing the lender to offer higher loan amounts on more favorable terms to the borrower.

  • Traditional Bank Business Loan

    If your planned acquisition has a high DSCR and you have extensive experience operating a convenience store, you may qualify for a conventional bank business loan. Bank terms are not generally as favorable as SBA loans, but they’re nothing to sneeze at, either.

  • Rollovers as Business Startups (ROBS)

    ROBS allow you to use funds from a qualified retirement account like an IRA or a 401(k), and roll the funds into a company you own. It is not considered borrowing from your retirement account, and it allows entrepreneurs to use their business as a tax-deferred investment.

  • Seller Financing

    If you’re buying an existing convenience store, you may be able to negotiate financing with the seller. In lieu of receiving the full purchase amount, the seller could be willing to finance all or part of the purchase price.

Top 3 Options for Convenience Store Inventory Financing

Starting out can be a big drain on financial resources, but if you cannot stock your convenience store shelves with items customers want to buy, you won’t last long. Also, convenience store sales are highly correlated to weather. Having plenty of seasonal (impulse) items can have a significant impact on sales.


Having enough seasonal inventory during peak demand is critical. In winter, you’ll need fireplace wood bundles stacked in front of the store, over-the-counter cold remedies, batteries, rock salt or ice melt, windshield wiper fluid and de-icer, ice scrapers, cold-weather treats. In summer, you’ll need frozen treats, packaged ice, coolers, tanning lotion/sunscreen, sunglasses, sports drinks, allergy aids, charcoal, beach umbrellas.

As we briefly discussed above, the E-cigarette and vaping marketplace is experiencing seismic growth and is expected to reach a market size of over $47 billion annually by 2025. Vaping supplies can be very costly to properly stock a proper selection of products. However, margins on vaping supplies can be the highest of all inventory found in a convenience store. If you operate a convenience store, E-cigarette and vaping supplies are must-carry inventory.

  • Merchant Cash Advance

    The merchant cash provider gives the convenience store a lump sum cash advance, and the c-store pays back the advance through regular (daily, weekly, or bi-monthly) payments based on a percentage of its credit card sales or other business receipts.

  • Business Line of Credit

    A business line of credit is like a cross between a loan and a business credit card. Like a business loan, an unsecured line of credit provides business financing that can be used for general business expenses. However, with a line of credit, there is no lump-sum disbursement; a business owner borrows only what is needed and only pays interest on the amounts borrowed.

  • Unsecured Business Loan

    Unsecured business loans are a type of business financing that do not require the borrower to pledge collateral (such as inventory, equipment, or real estate). This type of loan is issued solely on the borrower's creditworthiness.

Top 2 Options for Real Estate Financing

To rent or to buy is perhaps the biggest decision of all when it comes to operating and financing your convenience store. Since the success of a convenience store is largely based on location, it’s in everyone’s interest to consider ownership of the land and building that houses your store.

But you might be better off renting. If you can get a long-term lease on the building with renewal options, and the rent is substantially less than the monthly debt service of a real estate loan, then renting is the better choice. After all, having more disposable cash each month means you can reinvest it in your business for new inventory, employee training, or expansion.

Consider these questions first: Would a purchase make financial sense? Can you afford to buy the property? How is your Debt Service Coverage Ratio? If you decide that a purchase is the right choice, here are a few real estate financing options to get you started.

  • Commercial Loans/Bank Loans

    One of the best places to look for a loan is at the bank you where you have your business accounts. Banks are the most popular source of real estate financing and may offer the best terms to financing your beauty salon real estate purchase.

  • SBA 504 Loan

    The SBA has programs specifically designed for companies to acquire the real estate that the business occupies. The small business must occupy at least 51% of real estate asset and comply with federal business size standards. The business cannot have sales over $6 million or employ more than 500 workers.

Top 3 Options for Financing Convenience Store Expansion

Convenience store revenue is growing on a per-unit, store-by-store measure. That is due in large part to the expansion of product and service offerings. One of the biggest trends in convenience store expansion is the addition or merging of popular fast-food franchises within or adjacent to your convenience store. Examples of this are Dunkin Donuts and Subway. The franchisors of these brands are retrofitting smaller, express-type franchise models to accompany c-stores.

  • Franchise Financing

    Naturally, you would consider a franchise loan as your first option if you are planning to add an express or full-service franchise operation to your convenience store.

    When purchasing a franchise, you are licensing that franchise's brand, marketing, and proven business practice know-how. The better, more successful franchises are experts at site location planning, which will help your sales. Additionally, you benefit from the collective buying power with all the other franchisees in acquiring inventory, which can lower your costs.

  • Business Line of Credit

    A business line of credit should be a priority for convenience store owners. A credit line is ready capital that can be used on a moment’s notice, when opportunity knocks. Convenience stores must be able to react quickly to emerging trends, and that requires quick access to capital.

  • Merchant Cash Advance

    A merchant cash advance, as explained above may be a good option. This type of financing, which is not a loan, is usually granted through a card payment processor or specialty financing provider, and is repaid with proceeds that are generated from electronic payment sales.

    However, be aware that a merchant cash advance often carries higher costs and fees than other forms of loans and borrowing. Despite this, it still might be the right option for your business.

Top 3 Sources of Working Capital Financing for Convenience Stores

If we have proven one thing in this discussion, it’s that running a convenience store is about staying current with consumer demand, seasonal changes, and newly emerging trends. Having working capital on hand can make a world of difference in the success (or failure) of your convenience store.

One of the biggest mistakes business owners can make is not ensuring adequate working capital. The best time to secure working capital is when your business is thriving. After all, banks and other lenders want to know they are taking proper risk when lending. Don’t wait until your business is in desperate need to look for funding; establish credit lines as soon as possible.

  • SBA Loan

    It’s an often overlooked fact, but the Small Business Administration has several loan programs available to business owners to provide loans for working capital. That means you may use the loan for any business purpose.

  • Business Line of Credit

    It cannot be stressed enough that a business line of credit should be a part of every small business financing portfolio. A business line of credit is standby cash, ready when needed. You don’t pay any interest until you use the credit line, which makes it one of the most beneficial financing instruments for a fast-paced business like a convenience store.

  • Business Credit Card

    Somewhat similar to a business line of credit, a business credit card is useful for taking advantage of opportunities. Cards don’t accrue interest charges until you use them. Additionally, most credit cards offer rewards and cash back, so you can accrue benefits while buying the things you already need.