Financing Options For Your Petrol Station Projects in Tanzania

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People are trying hard to make me believe that renewable energy transportation technology like electric cars and natural gas vehicles is gaining ground and will displace the need for petrol stations in the region. I don’t believe them. Due to economic growth and broader access to private transport, Tanzania has registered a significant fuel demand increase.

It might slowly replace some petrol stations. But, the need for petrol filling stations will always be there. Petroleum will remain the backbone of our valuable fuel resources for moving Tanzania and Africa.

So investing in petrol stations can be a sustainable business that generates stable revenue with a return on investment(RON) of 13.5 percent and an estimated payback period ranging from 5 to 7 years, depending on the suitability of the petrol station site.

The petrol station business is capital intensive. It can cost between Tsh 350 to 1 billion to build one. As you can see, this is not business for faint-hearted entrepreneurs. So if you plan to build a petrol station from scratch, here are some financing options most entrepreneurs have worked with have used to develop their own modern petrol station in Tanzania.

1.Sell Your Untapped Asset
Suppose your company has resources such as land and heavy machinery that are currently not bringing cash flow. In that case, you can consider selling them to add money to develop your petrol station projects.

2.Bank Loans
With a well-written business plan that proves that your project will succeed, you secure sufficient funds from banks to develop your petrol stations.

3.Investors

Another option is to reach out to investors. Remember that investors want low-risk high, return opportunities.
So before you reach out to the investor, ensure you have conducted solid research on how your petrol site will succeed. What are your competitive advantages against competitors, and how much do you expect the volume of fuel you wish to sell per month from your proposed site locations? Some investors will have a share of net profit monthly or annually, depending on the agreement with investors.

I hope this helps.

Hussein Boffu runs a consultancy provides business planning, financial forecasts, market research reports, expert analysis and consulting for entrepreneurs and business owners. Reach out to him via email at hussein.boffu@tanzaniapetroleum.com or by calling, texting, or WhatsApp at +255(0)655376543.