Self-Storage Financing: Small Business Loan Options

What is self-storage financing used for?

Self-storage companies often generate reliable and profitable revenue streams. They can also enable valuable tax benefits such as depreciation deductions and cost separation strategies.

Still, running a self-storage business can be financially challenging, especially when your cash flow is tight.

Enter: self-storage financing. These loans can be used to build new storage locations, renovate old properties, or buy existing storage businesses.

Without funding, staying afloat in the self-storage industry can be expensive. In addition, it could deprive important areas of your business, such as: B. the payment of rental costs or ongoing operations.

In situations like these, taking out a self-storage loan can relieve your cash flow. It can also allow you to fund new business opportunities without giving up equity to an investor, making growth less stressful and more profitable.

Types of self-storage financing

As a business owner, you have several types of self storage loans to explore.

SBA Self-Storage Loan

The Small Business Administration (SBA) offers two loans that can be used to fund self-storage businesses.

The first is SBA 7(a), which provides up to $5 million to qualifying companies. Eligible uses for these funds include:

  • working capital
  • Purchase of real estate, equipment, machinery, self-storage units and other consumables and materials
  • Financing of new construction projects or renovation of buildings
  • Opening or acquiring a self-storage facility or business
  • Refinance of existing business debt

Learn more about the 7(a) loan here.

The second is SBA 504which provides up to $5.5 million for companies with less than $15 million in tangible net worth and an average net income of less than $5 million after federal income taxes for the past two years.

The aim is to promote job creation and business growth. Permitted uses include:

  • Purchase or financing of construction projects, buildings, self-storage properties, land, new facilities, machines, mini-warehouses and equipment
  • Improvement of lots, parking lots, utilities and existing facilities

Unlike 7(a), borrowers cannot use SBA 504 loans to cover working capital, purchase inventory, or refinance debt. It also cannot be used to invest in rental properties.

Go here to learn more about the 504 loan.

If your business operates in a rural area (“rural” is defined as “not in a city or town” with a population over 50,000), you may qualify for that as well USDA Business and Industrial Loans. Similar to SBA 7(a), this loan can be used for:

  • Purchase and development of land or buildings for commercial or industrial real estate
  • Purchase of machinery, equipment, consumables or inventory
  • Refinancing debt when it increases cash flow or supports new jobs
  • Purchase of existing companies

Visit usda.gov for the full list and details.

Small Business Self Storage Loans

Small business loans are ways to access flexible capital that can be used for a variety of purposes. Loan amounts range from $1,000 to $10 million in funding and can reach your bank account in as little as 24 hours.

As a self-storage business owner, you have many options. First, consider a working capital loan. These loans cover day-to-day operating expenses, including rent, utilities, supplies and employee salaries. They’re a great way to keep your business going when money is tight.

Next, you can also apply for a business loan. Lines of credit can be drawn wherever your business needs cash most. You can withdraw as much or as little principal as you like, and you only pay interest on the amount you use.

Another option is equipment financing, which can help fund racks, frames, drawers, and other consumables that increase the utilization of your buildings. The best loans have low APRs and can help you build your business credit, although many also require large down payments and strong credit to qualify.

Finally, you can also consider applying for a business credit card for smaller expenses. Business credit cards are generally easier to approve than most loans and can also help you get cashback rewards on items you’ve already paid for.

We’ve rounded up the best small business loans here in one easy-to-compare list.

Commercial bridging loans for self-storage companies

If you’re pressed for time and need to buy real estate, buy inventory, or cover cash flow as quickly as possible, a commercial bridging loan can give you the funds you need.

These short-term loans are often offered by banks or private lenders and can be processed quickly. However, they also require collateral to secure them and most must be repaid within a year. You can also bear higher interest rates.

However, the speed at which they are approved makes them a valuable tool when time is of the essence. Go here for an in-depth look at commercial bridging loans and how you can qualify.

Traditional bank loans for self-storage companies

The advantages of a classic loan from the bank include low interest rates, flexible use and credit-building advantages. You can use it to buy commercial property, replenish equipment, fund self-storage projects, or increase working capital. The predictable monthly payments can also help keep your cash flow steady.

However, the application process can take one to three months to be approved, and you may be required to provide collateral if you do not have strong credit. Startups are also likely to find the approval process more difficult.

Here is a detailed breakdown of bank loans and how you can qualify.

The Best Self Storage Financing Options

The best self-storage financing option for your business depends on your unique needs.

Use Nav to make finding the best options easier. Our platform syncs with your business data to instantly show you the opportunities you are most likely to qualify for. This is the quickest way to find the right fit.

Still, there are a few self storage loans that you can’t go wrong with if you qualify.

Compare many more options on Nav.

What you need to get self-storage financing

As with many other loans, the following factors increase your chances of qualifying for self-storage loans:

  • Good business and personal credit
  • Ability to repay the loan with the company’s cash flow
  • Ability to provide adequate collateral
  • Ability to demonstrate that the funding will be used for a purpose that falls within the accepted use cases of the loan

Not every loan requires all of these items, but the more you can check off, the more likely you are to be approved.

What you should consider when financing your self-storage business

Before you decide on financing, you should ask yourself two questions.

First, does it make practical sense to take out a loan? Business loans can carry high interest rates, which means you should be sure your future cash flow can cover the expenses before accepting the terms.

Balance this against the positive value these loan options can offer. Whether it’s an immediate cash flow boost, some much-needed debt relief, or financing to capitalize on new opportunities, well-planned financing can be just what you need to take your business to the next level.

The second question is: Which loan program is right for your company? There are many options on the market and not all will be a good fit at the moment. Focus only on the ones that fit your unique needs to avoid being locked into self-storage rental companies that hurt your business.

The good news is that finding the right fit doesn’t have to be overwhelming or require hours of research. With Nav, you can instantly see your best self-storage financing options based on your business data. Our algorithm shows you the loans you are most likely to qualify for so you can compare them quickly.

Create an account to view your options.

This article was originally written on May 9, 2022.

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