The Benefits of SBA Financing for Self Storage Properties
SBA loans have some pretty interesting benefits for self storage investors. Below we’ve gathered some of the most notable upsides of financing a self-storage facility through an SBA loan program.
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Many investors turn to loans secured by the Small Business Administration for the purchase, construction, or renovation of a self-storage facility. SBA loans have some pretty interesting benefits for investors. Below we’ve gathered some of the most notable upsides of financing a self-storage facility through an SBA loan program.
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SBA funding can be utilized for the refinance, purchase, expansion or new construction of a self-storage property.
SBA loans have term lengths of up to 25 or 30 years (in addition to any construction period incurred) — much longer than most alternative financing options.
Investors face lower equity and down payment requirements through SBA financing — roughly 10% on average for self-storage transactions.
There is only a relatively short time period investors have to worry about prepayment penalties. The penalty window for SBA loans is typically only three years. In some cases, SBA loans are able to be refinanced after just two years (with a 1% penalty fee).
Closing costs can be financed into the loan sum.
SBA funding can be utilized for working capital and business debt consolidation needs
What are the advantages of SBA financing for self storage properties?
The Small Business Administration (SBA) offers two main loan programs for self-storage investors: the SBA 7(a) program and the SBA 504 program. These loans are great alternatives for investors who don’t qualify for conventional loans.
The SBA 7(a) loan is great for those looking to buy a facility, but it can also be used for refinancing current debt, renovations, or technology upgrades. The maximum loan amount borrowers can take is $5 million with term lengths of up to 25 years.
The SBA 504 program provides long-term fixed-rate loans for the acquisition, development, or improvement of a self-storage facility. The maximum loan amount is up to $15 million, with a maximum 25-year term.
The advantages of SBA financing for self storage properties include access to long-term fixed-rate loans, higher loan amounts, and longer term lengths than conventional loans.
What types of SBA loans are available for self storage properties?
The Small Business Administration (SBA) offers two main loan programs for self-storage investments: the SBA 7(a) program and the SBA 504 program. The SBA 7(a) loan is great for those looking to buy a facility, but it can also be used for refinancing current debt, renovations, or technology upgrades. The maximum loan amount borrowers can take is $5 million with term lengths of up to 25 years. The SBA 504 program provides long-term fixed-rate loans for the acquisition, development, or improvement of a self-storage facility. The maximum loan amount is up to $15 million, with a maximum 25-year term.
What are the eligibility requirements for SBA financing for self storage properties?
The eligibility requirements for SBA 7(a) loans for self-storage facilities are that the borrower must have relevant business experience and other strengths to get the lender's support. Good credit and a stellar track record can also help. For SBA 504 loans, the borrower must be a for-profit business, occupy at least 51% of the facility, and the total project cost must be under $20 million.
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What are the benefits of SBA financing for self storage owners?
Small Business Administration (SBA) loans are government-backed financing options to support small businesses, including self-storage investments. There are two main SBA programs available for self-storage investors: the SBA 7(a) program and the SBA 504. These loans are great alternatives for investors who don’t qualify for conventional loans.
SBA 7(a) loans are great for those looking to buy a facility, but they can also be used for refinancing current debt, renovations, or technology upgrades. The maximum loan amount borrowers can take is $5 million with term lengths of up to 25 years. The SBA 504 program provides long-term fixed-rate loans for the acquisition, development, or improvement of a self-storage facility. The maximum loan amount is up to $15 million, with a maximum 25-year term.
SBA Express loans can provide businesses up to $350,000 in financing, which they can use for working capital, purchasing equipment, and buying or renovating commercial real estate. Self-storage businesses commonly use SBA Express loans for purposes including: renovating a building, funding working capital, and acquiring an existing business.
The benefits of SBA financing for self storage owners include access to government-backed financing, long-term fixed-rate loans, and up to $350,000 in financing for working capital, purchasing equipment, and buying or renovating commercial real estate.
How can self storage owners apply for SBA financing?
Self storage owners can apply for SBA financing through the SBA 7(a) loan program and the SBA 504 program. The SBA 7(a) loan program is great for those looking to buy a facility, but it can also be used for refinancing current debt, renovations, or technology upgrades. The maximum loan amount borrowers can take is $5 million with term lengths of up to 25 years. The SBA 504 program provides long-term fixed-rate loans for the acquisition, development, or improvement of a self-storage facility. The maximum loan amount is up to $15 million, with a maximum 25-year term. For more information, please visit SBA 7(a) loans and SBA 504 program.
What are the advantages of SBA financing compared to other financing options for self storage properties?
The Small Business Administration (SBA) offers two main loan programs for self-storage investors: the SBA 7(a) program and the SBA 504. These loans are great alternatives for investors who don’t qualify for conventional loans, as they provide up to $5 million with term lengths of up to 25 years for the SBA 7(a) program, and up to $15 million with a maximum 25-year term for the SBA 504 program. Additionally, the SBA 7(a) program offers up to 90% financing for those looking to build, acquire or refinance a facility, assuming you have enough relevant business experience and other strengths to get your lender’s support.
For more information on the SBA 7(a) program, please visit this page. For more information on the SBA 504 program, please visit this page.
SBA financing can also be used for the acquisition or refinance of multiple self-storage properties. SBA eligibility is determined by the total amount of SBA funding used — not by the number of loans an investor has. For investors with smaller needs, the SBA has a streamlined funding program offering amounts of up to $350,000.
Under the SBA 504 program, investors can finance much larger projects — as high as $20 million. Owners of "green" or energy-efficient self-storage facilities are allotted up to $16.5 million in SBA-guaranteed loans, subject to the property demonstrating the ability to produce a sufficient amount of energy.
Conclusion
Loans secured by the Small Business Administration can be a great source of financing for self-storage property investors. SBA loans have longer loan terms than some of the other commercial real estate financing options — and much more flexibility. Investors using SBA financing are only expected to make a down payment of 10%, and closing costs can be financed into the loan, increasing an investor’s available cash flow after signing for a loan. SBA financing may not be the best fit for every situation, but it may be a benefit to include these options in your search when conventional financing isn’t a possibility.