Self Storage Business Loans From The SBA
Self-Storage Businesses Are Now Eligible for SBA Loans
The SBA has changed the rules for "passive income" properties making Mini Storage Businesses eligible for SBA financing. This is big news for those looking to refinance, acquire or build a self or mini storage facility.
Higher SBA Loan and Eligibility Limits - Larger Businesses Eligible
The new Self Storage Business guideline also coincides with the following changes:
- New higher SBA 7a loan and eligibility limits
- Larger businesses are now eligible for SBA loans. A small business is now defined as having a tangible net worth of up to $15 million and net - after tax - income of less than $5 million on average for the last 2 years.
- New higher 504 loan and eligibility limits including the ability to fund multiple large projects if facilities are energy efficient or produce some of their own renewable energy. The energy efficient test simply requires a 10% reduction in energy consumption and we are looking into ways it can also be used in tandem with the new 504 refinance option. (See refinance info below).
Click here: SBA Green Loans for energy efficient information
New Refinance Option for Self Storage Facilities
The new 504 refinance option is a temporary one and a half year program initially open to businesses who have a balloon coming due by the end of 2012, but the expectation is that the Small Business Administration will open it up to others in late Spring or Summer of 2011 and many self and mini strorage facilities should be eligible.
Click here: SBA Refinance for info on the new refinance provision.
Self Storage SBA Loan Benefits:
- You can now use SBA financing to acquire or refinance multiple self storage/mini warehouse businesses since SBA eligibility is not determined by the number of loans but by the total amount of SBA eligibility used and this amount is now $5 million ($5.5 million for green or energy efficient buildings). Furthermore, "green" or energy efficient facilities have a $5.5 million 504 (second) mortgage limit PER PROJECT making it possible to finance numerous facilities with the program.
Please contact us at 1-800-414-5285 for more info re: Green or Energy Efficient Self Storage Financing.
- Longer term loans available (up to 20 to 25 years).
- SBA Loans have lower equity and down payment requirements - as low as 10 to 20% for self storage - which is helpful for refinances, purchases and construction.
- SBA financing can be used to make improvements or to expand mini warehouse properties.
- Working capital and business debt consolidation are possible for self storage businesses.
More Detailed Info:
Multiple Self Storage Facilities Now Financeable
All of the recent changes should have a significant positive impact on the Self Storage Industry, especially the increase in the SBA maximum eligibility rules.
SBA 7a loans are now available up to $5 million OR multiple 7a loans can be used to finance (or refinance) multiple properties. This is because the SBA eligibility is not calculated per loan but per borrower/business owner, so having one loan does not disqualify you from getting another. (i.e. you can have multiple loans that total $5 to $5.5 million).
More Eligibility with the 504 Loan Program Might Be Possible
Even higher loan amounts and project costs are possible with the 504 program because the 504 loan program consists of 2 loans - a first mortgage from a bank or lender and a 2nd mortgage guaranteed by the SBA, but only the second mortgage counts toward your maximum SBA eligibility...so if you primarily use the 504 program you should be able to finance more properties.
It is also likely that many storage facility businesses can qualify for a 504 refinance either now or later this year making it possible to access long term low rate financing.
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Current Market
SBA self storage loans are new to SBA lenders because passive income properties were not eligibile previously, so it may take lenders a little while to figure out what they are willing to do under the new guidelines.
Self Storage Construction Loans
Self storage construction financing will be difficult to obtain in the near term for "projection based" transactions unless you have enough cash flow from other properties, businesses or sources to cover the payments through stabilization.
Lenders are much more willing to fund refinances, acquisitions and expansions of existing profitable businesses.
Please contact us at 1-800-414-5285 to discuss your individual situation.
We will be updating this page as soon as we have clarification on the new SBA 504 refinance guidelines.
