Stable Industries, No. 2: Gas Stations

Where SBA loans fail less often, one industry at a time. A series for acquisition entrepreneurs, built on SBA 7(a) loan-level servicing data. Read Volume 1: Veterinary Practices. Data in partnership with Ink.

Gas stations don't look like an obviously safe business to buy. Fuel margins can be thin and volatile. Underground storage tanks create environmental liabilities. And gasoline demand faces a long-term decline.

But the SBA loan data tells a surprisingly different story.

Gas station loans have defaulted about two-thirds less often than the broader SBA 7(a) book. Unlike many of the lowest-default industries, acquisitions are common: in FY2025, roughly one in three gas station loans with a known business age financed a change of ownership. Acquisition loans have also performed unusually well.

There is a catch. Annual gas station defaults have risen from 0.37% in FY2023 to 1.98% through April of FY2026. They still outperform the program, but the trend has turned sharply.

And one distinction matters throughout this issue: the SBA tape measures loan defaults, not investor returns. A lender recovering its balance through a property sale can still leave the owner with little or no equity.

The annual figures count defaults relative to the outstanding loan population. The ten-year figures follow loans disbursed from January 2010 through April 2016 for a full decade. Neither is a business-failure rate.

Among neighboring businesses, the comparison with convenience stores is particularly striking.

Convenience stores without pumps have defaulted at almost exactly the program average. Gas stations with convenience stores have not.

But part of the gap is a size effect. Restrict the comparison to loans of at least $350,000 and the ten-year rates become 5.64% for gas stations and 7.36% for convenience stores. The advantage narrows, though it does not disappear.

The SBA data establishes the repayment record. It cannot, on its own, tell us what caused it. Several features of the business and its financing offer plausible explanations.

According to the National Association of Convenience Stores, fuel accounted for 65% of convenience-store sales in 2025 but only 38.8% of gross profit. In-store sales reached $341.2 billion, their 23rd consecutive year of growth. Foodservice alone contributed 38.9% of in-store gross profit.

That's an attractive combination: a frequent, necessary purchase brings people onto the property, while merchandise, beverages and prepared food generate a larger share of gross profit. Gross profit is not net operating profit, however. Labor, card fees, maintenance and other expenses have to be paid before an owner earns a return.

Fuel economics have also changed. OPIS reports gross retail gasoline margins around 22–24 cents per gallon before 2020. NACS fuel statistics, drawing on OPIS data, put the figure at about 39–40 cents in 2023–2025. These are gross cents per gallon, not net earnings, and 2026 has brought substantial margin pressure.

About two-thirds of recent performing gas station loans have a recorded 25-year term, as do 73% of FY2025 gas station acquisition loans. Under SBA rules, that term is consistent with substantial real-estate financing, though the term alone does not prove that every borrower owns the property.

Loan size is correlated with the outcome. Among the ten-year cohort, loans of $1 million or more defaulted at 4.61%; loans below $150,000 defaulted at 13.22%, slightly worse than the 12.27% program-wide rate for similarly small loans.

Large borrowers, real estate collateral and lender selection may each contribute. We cannot separate their effects with these descriptive figures.

About 60% of gas station loans approved during FY2018–2022 list a brand or fuel-supply agreement in SBA's public franchise field, compared with roughly 13% program-wide. The listed arrangements include major fuel brands and regional distributors.

A supplier may provide branding, inventory access and marketing support. The agreement can also constrain pricing, impose minimum volumes or require expensive reimaging. The SBA data does not show that having a supply agreement independently reduces defaults.

In FY2025, the median gas station loan of at least $350,000 priced at prime + 1.62 percentage points, versus prime + 2.00 points for SBA loans of comparable size. That is a more useful comparison than looking at all loans, since gas station loans are much larger than the typical SBA loan.

Among acquisition loans, the gap was prime + 1.50 points versus +2.00 points across all SBA acquisitions. At a $1,817,500 loan balance, half a percentage point is roughly $9,100 in first-year interest before amortization.

Lenders' pricing is consistent with an industry they consider relatively attractive, but it also reflects which borrowers and transactions receive approval.

Finally, gas station financing requires unusually intensive environmental review. The SBA's SOP 50 10 imposes special review and tank-compliance requirements. That may screen some risky properties out of the financed population. It is a hypothesis, not a causal finding.

This is what makes gas stations particularly relevant to the acquisition community. In FY2025, 34.7% of gas station loans with a known business age financed a change of ownership, versus 11.1% across the SBA program.

The median FY2025 gas station acquisition loan was $1,817,500. Nearly 74% were at least $1 million, about 73% carried a 25-year term, and the acquired borrowers reported a median of five employees.

It is also a fragmented operating market. NACS reports that 54.8% of U.S. convenience stores selling fuel are single-store operations. That's a meaningful universe of independent sellers, even as large chains compete aggressively.

How do loans used to buy stations perform?

These are older disbursement cohorts followed for a full three years, not FY2025 acquisitions. Loans too recent to have three years of observation are excluded.

Only ten defaults among 744 acquisitions is a small sample. The estimated acquisition default rate has a 95% confidence interval of 0.73%–2.46%. Even allowing for that uncertainty, the performance looks materially better than the 4.04% figure across all SBA acquisitions.

Within gas stations, buying an existing operation has not shown a meaningful default-rate penalty compared with other lending to the industry. That's the most acquisition-relevant finding in the dataset.

SBA approved 539 gas station loans totaling $890.5 million in FY2025. The median loan was $1,236,000, compared with $187,000 across SBA 7(a). Standard gas station 7(a) loans approved during FY2023–2025 had a median of $1.5 million; SBA Express loans had a median of $50,000.

Texas, California and Washington together accounted for about 45% of recent gas station lending. Washington stood out in acquisitions: 20% of gas station acquisition loans approved in FY2023–2025 were there, almost equal to California's share. We cannot distinguish underlying market activity from lender concentration with this dataset.

Defaults are rising. The most consequential risk signal is already in the loan tape.

The pooled FY2023–April 2026 gas station default rate of 1.12% is close to the pre-pandemic 1.09%. That reassuring average conceals a more than fivefold increase since FY2023. The recent rise is broad rather than confined to a single lender or state.

The current fuel shock hasn't yet appeared in these defaults. The EIA's October 2026 outlook says retail gasoline averaged $4.35 per gallon in September and reports compressed retail and distribution margins as wholesale prices surged. Our loan defaults stop in April. The recent price shock cannot explain the earlier FY2025 deterioration, and its ultimate credit effect remains unknown.

Long-term demand and costs are under pressure. U.S. gasoline use in 2025 was roughly 4% below 2019, according to the EIA. NACS reports convenience-store transactions per location fell 2.7% in 2025 while industry credit and debit card fees reached a record $21.3 billion. Smaller operators face rising competition from chains with more sophisticated foodservice and purchasing operations.

Environmental exposure can dwarf an apparent bargain. Underground storage tanks, historic contamination and fuel-line leaks can create cleanup costs, insurance exclusions, transfer restrictions and impaired property values. SBA-required diligence lowers the chance of overlooking these issues, but does not remove the buyer's liability. The EPA's state cleanup-fund directory is a starting point, not a substitute for transaction-specific environmental advice.

The recession record is a useful warning. Among gas station loans disbursed in FY2008, 20.38% defaulted within three years, compared with 24.84% across SBA 7(a). Stations did better than the average borrower, but roughly one in five still defaulted. Relative resilience is not recession immunity.

Gas station defaults do not cluster in an unusual year. Among loans defaulting within ten years, 5% defaulted in year one, 20% in year two and 20% in year three. The median was approximately 39 months after disbursement, a timing pattern similar to the broader SBA book.

Losses following default have historically been somewhat less severe. Within the ten-year cohort, principal charged off represented 25.0% of the original amount of defaulted gas station loans, compared with 29.4% program-wide. Among loans actually charged off, the median loss was 58% of original principal versus 74% across the program.

Real estate and equipment may help explain that difference, but the dataset doesn't isolate property-sale recoveries. And recovery for the lender is emphatically not the same thing as a good financial outcome for the buyer.

Separate the business from the property. Value the real estate and operating cash flow independently. A 25-year SBA term may indicate substantial property financing, but it doesn't validate the purchase price of either component.

Underwrite gallons, not just revenue. Review monthly fuel volume, gross profit per gallon, inside-store sales, foodservice performance and gross profit by category. Fuel-price moves can dramatically change reported sales without improving earnings.

Read the supply agreement early. Examine the term, pricing formula, required volumes, rebates, signage and reimaging commitments, transfer consent and termination provisions. A poor fuel contract can negate a strong location.

Budget for environmental diligence before closing. Have qualified advisers review tank testing, prior releases, Phase I findings, remediation obligations, insurance and available state funds. Don't treat an SBA environmental approval as an indemnity.

Stress-test current margins. The 2023 operating environment is not the 2026 environment. Higher financing costs, wholesale price spikes, rising operating expenses and weaker gallon demand can each undermine otherwise attractive historic debt-service coverage.

The conclusion: Gas stations have been a relatively resilient category of SBA credit, and a rare one where acquisitions are both common and associated with historically low defaults. That makes them worth studying, not automatically worth buying. The latest rise in defaults is exactly why the distinction matters.

Want to compare another industry? Explore Ink's SBA industry default-rate data and look up the business or NAICS code you're considering.

Gas station loans defaulted at an annual incidence of 0.99% from FY2017 through April 2026, compared with 2.82% across all SBA 7(a). Among loans observed for a full ten years, 7.15% defaulted.

Yes. In FY2025, about 35% of gas station loans with a known business age financed changes of ownership. Environmental diligence, fuel contracts, and the allocation between business assets and real estate deserve particular attention.

The median FY2025 SBA gas station acquisition loan was $1,817,500. Nearly 74% were at least $1 million.

Source: SBA Loan Data. Historical loan default experience does not predict the outcome of any individual business or acquisition. This analysis is educational, not legal, financial or investment advice.