Self Storage Financing, SBA Self Storage Loans & Mini-Storage Financing

Self Storage Loans From The SBA

Self storage financing is available via the SBA loan programs.

SBA loans are available to purchase, refinance, expand or build self storage units or a mini-storage facility.  RV and Boat storage facilities are also eligible, as are some larger commercial contractor storage units and in some cases, cold storage warehouses.

Additionally, you can use an SBA loan to finance an RV park and/or an RV park that includes RV and Boat Storage or self-storage units.

90% Self Storage Financing

90% loan to value self storage financing and 90% Boat and RV storage facility financing is possible with both of the SBA programs that allow for the financing of real estate - the 7a and 504.

Technically, some new SBA rules have made 90% to 100% financing available for self storage and RV and boat storage facilities IF you have a seller who is willing to hold a 2nd mortgage on full standby for 24 months AND a lender likes enough of what they see as far as other qualities in a loan file.

Some of these new rules are going into effect as of August 1, 2023 and they will make more transactions possible with less out of pocket will some lenders.

SBA 7a

If you are purchasing a self storage facility or property then SBA self storage financing is available for $5 million or more with 10% down using the SBA 7a program.

$10 million in "7a" financing is available for exceptionally strong borrowers who put up additional collateral (equity in other properties).  Lenders that offer the higher loan amounts accomplish this by putting an "unguaranteed" 2nd mortgage behind a $5 million 7a first mortgage.  The additional collateral you put up helps mitigate the additional risk.

SBA 504

It is also possible to use the 504 program to get 90% financing when purchasing an existing self storage property IF you have relevant experience and you are buying a facility with consistent, profitable cash flow based on historical tax returns.  The benefit of the 504 is it allows much larger loan amounts.

90% self storage financing is available with the 504 for projects in the $12 million range for experienced borrowers.  Much higher loan amounts are possible with the 504 when putting 15% to 20% down.


These loans are available for those who do and those who do not have storage industry experience.  Those lacking storage experience must have enough relevant business experience and other personal strengths to get a lender comfortable with their ability to own or manage a facility.  It is definitely NOT a requirement but it can help if you have experience with ownership of other types of investment property or businesses.

Current self storage owners generally need good credit and a proven track record.

SBA Self Storage Down Payment Requirements

Either SBA program allows you (or your spouse, if married) to borrow the down payment from another source/another lender assuming you can make the payments on those borrowed funds from yours (or your spouse's) other source of income.

Other sources of down payment include gifts, investors, tax and penalty free retirement account 401k rollovers, retirement account loans, and seller financing on "full standby."  If using these alternatives sources for the down payment a lender will still require you have enough of your own "skin in the game."  How much that is depends on the full details of your request.

Construction Financing Up To 90%

Ground Up

Construction financing is definitely available and high leverage and very flexible financing structures are possible with both programs.

If you are building a storage unit business from the ground up then 90% self storage financing is available with an SBA 7a loan* whether or not this is your first facility.

You can also finance up to 90% of a construcion project using the 504 if the new facility is an "expansion" of your existing self storage business.  If it is a true startup then the 504 requires 15% down whether it is ground up construction or a conversion of an existing building.

Finance Construction Interest and First 2 Years of Payments

Perhaps the biggest benefit to using an SBA loan to build a facility is that some lenders will finance ALL of the construction interest plus a 10% construction contingency, interest reserves, all closing costs and most importantly, ramp up reserve/working capital to make the payments for first two years of the loan.

This ability to finance up to the first 2 years of payments into the loan is what really sets SBA self storage loans apart from conventional lending.

Prepayment Penalty

The SBA 7a program is a single close loan that allows you to finance land, construction, all costs paid prior to closing (borrower has to pay them but they are finance-able so they are credited back at closing) plus all costs mentioned above.

It has a 3 year "declining" prepayment penalty that is 5% in year 1, 3% in 2 and just 1% in year 3.

10% Down and No Payments for 2 to 3 Years

The 3 year prepayment penalty starts to wind down from the day of closing, so when you consider the various flexible ways of coming up with the down payment, plus the ability to finance all  payments during construction AND up to the first 2 years of payments once you open for business, this means it is possible that you could:

  1. creatively come up with the down payment 
  2. not come out of pocket any payments for approx 2 to 3 years
  3. sell or refinance the facility - possibly with "cash out" to go buy or build another - and do so without a prepayment penalty just 3 years from the day of intial closing (or with just a 1% penalty 24 months from closing)

These guidelines are tailor made for someone looking for high leverage "investment property financing" who wants a "repeatable" formula with essentially what amounts to very attractive bridge/construction-to-perm financing.

Whether or not you plan to hold the property long term, this structure can give you have a level of comfort knowing that your construction payments as well as your payments during lease up are covered and you can focus on marketing and filling up the facility.

*New construction using the 7a program requires the project get to breakeven 24 months after opening.

Self Storage Financing Rates

The interest rate you pay for an SBA self storage loan can be fixed or adjustable.

Under the 7a program, SBA self storage lenders almost always offer floating rates at Prime +1 to Prime + 2 but some will offer fixed rates.  Floating rates are much mmore common for ground up construction but it is not an absolute as some lenders will offer fixed rates, however they are typically less agressive with regard to loan to value or loan to cost.

Lower floating rates are offered on the stronger transactions and long term fixed interest rates of 25 years are definitely possible for stronger projects or for refinance of exisitng faciliites.

SBA 504 Self Storage Loans

The SBA 504 program offers a two loan self storage financing structure where you can typically get a 5, 7 or possibly a 10 year fixed rate first mortgage amortized over 25 or 30 years with a 25 year fixed rate second mortgage making for a very attractive blended interest rate.

The 504 can be used to finance larger self storage projects including construction with 10% to 15% down depeding on whether or not the loan is for an expansion or acquisition of an existing business or not.

Projects above $15 million are possible with the 504.

Third Party Management - Big Management Companies Can Manage as of August 1, 2023

Many of the mini storage loans originated today are for small businesses and most owners self-manage the properties, while others use an onsite manager or a third party management company. And since SBA loans can now be as high as $20 million+ there are situations where there are true small businesses who have rather large facilities that need a larger third party management company. This had been acceptable in the recent past depending on the language in the management company agreements and some of the larger players like CubeSmart and Extra Space had proven to be acceptable to some lenders.

This all changed back on January 1st, 2018 when SBA tweaked some of the language in their "underwriting manual" which made this practice less possible, however, as of August 1, 2023 it IS possible to use the big management companies again.  This is a major change in the SBA rules for somewhat passive owners and should open up to opportunitities for borrowers who prefer to be less hands-on and use the best available management companies.

There are a few management companies that are approved by SBA and there should be more soon, so please contact us to see if your project/management scenario is eligible.

Solar Panels on Self Storage

Many current owners of mini-storage facilities have realized the benefits of putting solar panels on the rooftop or on their property as there can be significant benefits to doing so between various state and federal incentives, accelerated depreciation, cost savings, the ability to sell energy "back to the grid" and the good PR that comes from being known as a "green facility."

The Federal Solar Tax Credit provides a major cost savings as the credit for a solar system installation is still 30% as of 2019.

Solar panels are actually financeable - especially with SBA - as lenders have come to realize the value it provides long term.  Obviously it adds to the cost and there are various considerations regarding additional weight on a building, the age of a roof, available land, appearance, local zoning, etc., but it is something worth considering and it is possible to finance the cost of the solar installation with some lenders.

Portable Storage, Mobile Storage

Mobile and portable storage businesses similar to PODS like Go Mini's, UNITS  and Mi-Box are also financeable with or without real estate. Typically you will need 10% down whether you are financing just the business or the business plus real estate.

If financing just the business and equipment (containers, trucks, etc.) the term of the loan could be up to 20 years depending on the remaining useful life of the equipment. Keep in mind that SBA requires that the lease for any land or buildings (including renewal options) be at least as long as the term of the loan.

Owner Not Local

Ideally, it is best if a borrower is local to a property, but it is not a firm requirement.

Some lenders will allow an out of town owner to take advantage of SBA self storage financing if they can make a good case that they will be intimately involved in the ownership and management of the facility AND if they have a strong enough background in real estate, business ownership or some other very relevant experience to give a lender a level of comfort.

Borrowers will need to present a plan that includes, among other things, how often they will visit the property, what procedural safeguards they will put in place to control funds and a plan to monitor security and employees.

RV and Boat Storage Facility Financing

Boat and RV Storage facilities are eligible using the same guidelines as self storage. As with mini-storage, ground up construction might require a feasibility study (market study) and everything from a large indoor climate controlled facility to an outdoor facility with minimal property improvements is financeable. The less extensive the improvements, the more important the location and the business plan will be.

Please call 1-800-414-5285 for more information as each situation is unique.

Self Storage Financing - SBA Loan Benefits:

Below are some of the benefits of financing mini-storage via the SBA.  You can visit this post on our blog for a more compete rundown of positives and negatives.

  1. Longer term loans are available (up to 25 or 30 years plus the construction period).
  2. SBA Loans have lower equity and down payment requirements - typically 10% for self storage - for refinances, purchases, expansions  or construction.
  3. The prepayment penalty for most loans is just 3 years, which allows you to refinance without penalty after 36 months. You may also be able to refinance after just 2 years and pay a 1% penalty.
  4. All closing costs are financeable
  5. Little to NO financial covenants
  6. SBA financing can now be used 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.
  7. SBA financing can be used to make improvements or to expand mini storage properties and there is a streamlined program available for those with good credit for loans under $350,000.
  8. Working capital and business debt consolidation are financeable for self storage businesses. Furthermore, under the 504 program, much larger projects are possible (technically as high as $20 million+) and owners of "green" or energy efficient facilities can have a total of $16.5 million in SBA guaranteed loans as long as they produce enough of their own energy.
  9. It is technically possible to create "100% Financing."  It is not truly available in the sense that it is with other types of owner occupied business property.  Click here if you need help with 100% financing for a building to house your existing business, but it is possible 100% self storage financing one of 3 ways:
    1. If you already own a profitable mini-storage business with equity you may be able to leverage that equity to purchase another facility without making a down payment. This is difficult to do as most lenders will not allow it, but if you bring the new facility under the umbrella of your existing business and that business is profitable and there is equity in it or in your other facilities then it is possible as an expansion of your existing business.
    2. If you have a 401k from a former employer you may be able to roll it over tax and penalty free to be used for the down payment to purchase or start of a storage facility.
    3. As mentioned above, the SBA self storage rules allow you to borrow the down payment as long as you can prove you have a way to repay the borrowed funds from another source.

NON-Recourse, NON-SBA Self Storage Financing

Conventional financing is available if you have at least 25% equity.  Various loan options are available including 15 year fixed rates and 10 year fixed with a  30 year amortization and in some cases interest only options are available. Additionally, non-recourse financing is available with very low rates. Properties need to be stabilized with good historical financials.

Please contact us at 1-800-414-5285 to see what is possible.

Mini Storage Financing with NO Prepayment Penalty up to 80%

Excellent NON-SBA financing with recourse/personal guarantee but with NO Prepayment Penalty is available up to 75% (possibly 80%) loan to value for properties and borrowers/sponsors with strong financials. Typical minimum loan amount will be $500,000.

Self Storage Financing - Recent Transactions: 

  • $17 million ground up construction loan using SBA 504 program with 15% down.    
  • $7.35 million ground up construction and refinance with 5% down.  Lender refinanced borrower's existing SBA loan that was 2 years old, leveraged the equity in that property for half of required down payment on the new 504 ground up construction loan and provided an addl 7a loan to cover working capital and closing costs.
  • $4 million ground up construction project at 90% loan to cost. Borrowers had no previous storage experience and one borrower had a previous Bankruptcy.
  • $7 million, 90% loan to cost construction/renovation of a former medical office building into mini storage. Borrower did not have storage industry experience, but had very good commercial real estate ownership experience.
  • 90% loan to value financing for an under performing mini storage facility in Wyoming in spite of the fact that the clients had no mini storage industry experience. The occupancy for the facility had historically been lower than the rest of the market due to the fact that the current owner was not local and unable to provide real hands-on customer service. Despite this fact, the facility had enough cash flow to service the debt based on a 25 year amortization. Our clients, who are locals, were able to put down only 10% using the SBA 7a program.
  • Recent client had no ministorage experience, but owned a few single family investment properties and was looking to acquire a smaller facility with oversized units in Nebraska. The client had good credit and would continue to work his "regular" job. We were able to get him a 25 year loan with only 10% down.
  • Refinance of a storage facility in Georgia owned by combining it with the purchase of 2 other bank-owned facilities with (effectively) zero out of pocket. Client was purchasing 2 foreclosed properties owned by 2 different banks and was looking to leverage his equity in a 3rd property to make it happen. We assisted in structuring a transaction where he refinanced his existing facility to a lower rate/longer term loan which allowed him to purchase the 2 foreclosed properties. The client brought 10% to closing for the down payment on the 2 properties and the lender was able to structure the loan so that he received 10% back at closing in the form of working capital - effectively creating 100% financing.
  • Refinance out of a high rate, shorter term loan into a low rate 5 year fixed with a 25 year amortization that dropped his payments almost in half. The property was located in semi-rural area of North Carolina and was quite basic but had solid cash flow for the last few years.
  • Ground up construction of a Boat and RV Storage facility in Colorado - 10% down.
  • Refinance of a mini-storage in Alaska for $6 million
  • Projections-based purchase of an under performing facility by experienced buyers on panhandle of Florida - 10% down.
  • Purchase of existing facility in Michigan for borrower with no storage experience and 10% down
  • $7 million ground up construction of a mobile container / portable storage business building with 10% down (similar to PODS) in Texas
  • $2.7 million Ground Up Construction of facility in Ohio to borrowers with previous single family rental property experience and 10% down
  • $400,000 loan for the purchase of a bank owned property.  Borrowers had no previous self storage experience. 10% down and imperfect credit.
  • $1.5 million loan for ground up construction of a mini-storage and boat storage facility with 10% down in Washington. Borrower had no previous storage industry experience.

Refinance Option for Self Storage Facilities

The temporary refinance option offered through 504 Small Business Administration program that enabled the refinance of self and mini storage facilities at 90% loan to value expired September of 2012, but it is back - see here for details.

There is also "permanent" refinance provision (outlined below) that could be useful as well.

The 7a refinance program will continue to be available.

504 "Permanent" Refinance AND Expansion Option

A refinance option is available for businesses undergoing an expansion.

The caveat is that the cost of the "expansion" has to be twice what is currently owed on the subject property or properties.

An "expansion" is defined as: "any Project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business applicant."

To qualify, the amount borrowed for new construction, expansion of an existing location or expansion to a new location must be for the same business to be considered eligible.

In other words, you can refinance an existing debt as part of an expansion of your business.

A few examples:

  • You own a facility and owe $1 million on it and you want to purchase of a competitor's location for $2 million.
  • You own a facility and owe $1 million on it and you want to build a new location with total project costs of $2 million.
  • You own a facility and owe $500,000 on it and you want to expand the facility at a cost of $1 million.

In order to qualify there are a few key guidelines that must be met:

  • 85% or more of the debt to be refinanced must be "504 eligible" - i.e. land, buildings, equipment.
  • The new loan will provide a monthly payment that is 10% lower than the existing financing for that portion of the existing debt
  • You have been current on all loans to be refinanced for at least the last 12 months

Higher SBA Loan and Eligibility Limits - Larger Businesses Eligible

The relatively new Self Storage Business guidelines also coincide with the following changes:

  1. New higher SBA 7a loan and eligibility limits of $5 million.
  2. 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.
  3. 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 requires a 10% reduction in energy consumption and it might be possible use it in tandem with the 504 refinance option. (See refinance info below).Click here: SBA Green Loans for energy efficient information

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 million).

More Eligibility with the 504 Loan Program Might Be Possible

Even higher loan amounts and project costs are available to storage facility businesses with the 504 program because the 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 if you primarily use the 504 program you should be able to finance more properties.

SBA Self Storage Loan Current Market

SBA self storage loans were new to SBA lenders in 2011 and some were slow to warm to the asset class since ministorage businesses were typically perceived as passive income properties.

Many lenders now understand the industry better and are actively making loans.

Self Storage Construction Loans Available

Self storage construction financing is definitely available from a few select lenders with many more lenders interested in funding refinances, acquisitions and expansions of existing profitable businesses,

Maximum loan amounts will vary by lender and the SBA programs are excellent if you are trying to finance a transaction with higher leverage or a smaller down payment.

Please contact us at 1-800-414-5285 to discuss your individual situation.