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Self-Storage Financing: Loan Options for Small Businesses

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What is self storage financing used for?

Self-storage businesses often generate reliable and profitable revenue streams. They can also enable valuable tax advantages such as capital cost allowances and cost separation strategies.

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

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

Without financing, it can be costly to stay afloat in the self-storage industry. Additionally, it could divert funds from critical areas of your business, such as paying rental fees or managing day-to-day operations.

In such situations, getting a self-storage loan can take the strain off your cash flow. It can also allow you to fund new business opportunities without ceding 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 Loans

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

The first is LS 7(a), which offers up to $5 million to qualifying businesses. Eligible uses of these funds include:

  • Working capital
  • Purchase of real estate, equipment, machinery, self-storage units and other supplies and materials
  • Financing of new construction or building renovation projects
  • Launching or acquiring a business or self-storage
  • Refinancing of existing commercial debt

Go here to learn more about the 7(a) loan.

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

Its objective is to encourage job creation and business growth. Eligible uses include:

  • Buy or finance construction projects, buildings, self-storage properties, land, new facilities, machinery, mini-warehouses and equipment
  • Improve grounds, 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 property.

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 greater than 50,000), you may also be eligible for the USDA Business and Industry Loan. Similar to SBA 7(a), this loan can be used to:

  • Buy and develop land or buildings for commercial or industrial properties
  • Buy machinery, equipment, supplies or inventory
  • Refinance debt if it increases cash flow or supports new jobs
  • Acquisition of existing companies

For the full list of details, visit usda.gov.

Small Business Self-Storage Loans

Small business loans are opportunities to access flexible capital that can be applied to a wide variety of uses. 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 no shortage of options. Consider a working capital loan first. These loans cover day-to-day operating expenses, including rent, utilities, supplies, and employee salaries. It’s a good way to keep your business running if you’re short on cash.

Then you can also apply for a business line of credit. Lines of credit can be applied where your business needs cash the most. You can withdraw as much or as little capital as you want and you only pay interest on the amount you use.

Another option is equipment financing, which can help pay for racks, frames, drawers, and other supplies that increase your buildings’ occupancy rates. The best loans come with low annual interest rates and can help you build your business credit, although many also require high down payments and strong credit to qualify.

Finally, you can also consider applying for a business credit card for small expenses. Business credit cards are generally easier to obtain than most loans and can also help you earn cash back on items you’ve already paid for.

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

Commercial bridging loans for self-storage businesses

If you’re pressed for time and need to buy real estate, purchase inventory, or hedge your cash flow as soon as possible, a commercial bridging loan can provide you with 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 and most must be repaid within a year. They may also carry higher interest rates.

Nevertheless, the speed at which they are approved makes them a valuable tool if time is of the essence. Go here for a detailed overview of commercial bridging loans and how to qualify.

Traditional bank loans for self storage businesses

The benefits of getting a conventional loan from the bank include low interest rates, flexible usage, and credit benefits. You can use it to purchase commercial real estate, restock equipment, fund self-storage projects, or increase working capital. Its predictable monthly payments can also help keep your cash flow stable.

However, the application process can also take one to three months for approval, and you may need to provide collateral if you don’t have a good credit rating. Startups will likely find the approval process more difficult as well.

Head here for a detailed breakdown of bank loans and how to qualify.

The best self storage financing options

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

To make it easier to find your best options, use Navigation. Our platform syncs with your company data to instantly show you the opportunities you are most likely to qualify for. It’s the fastest way to find the right fit.

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

Compare many other options on Navigation.

What you need to get financing for self-storage

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

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

Not all loans require all of these items, but the more you can check off, the more likely you are to be approved.

What to Consider When Financing Your Self Storage Business

Before you decide to seek financing, you should ask yourself two questions.

First, does getting a loan make practical sense? Business loans can come with high interest, which means you need to be sure your future cash flow will be able to cover the expenses before agreeing to the terms.

Compare that to the positive value these loan options can offer. Whether it’s an immediate boost to cash flow, much-needed debt relief, or financing to take advantage of new opportunities, well-planned financing can be just what you need to do. take your business to the next level.

The second question is: Which loan program is right for your business? There are many options on the market, and not all of them will fit right now. To avoid being tied to self-storage lenders that hurt your business, focus only on those that meet your unique needs.

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

Create an account to see your options.

This article was originally written on May 9, 2022.

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