Financing for Self Storage Facilities

Self storage loans are typically used to finance the purchase, renovation of self storage facilities. The most popular self-storage loans are traditional bank loans, CMBS, Life Company loans, SBA 7a loans for commercial real estate and SBA 504 loans.

How Self Storage Financing Works

Self Storage loans are used to space out the total cost to build, or acquire storage facilities, over a 20-30 year period. Self-storage lenders generally look at the operations financial performance, value of the real estate, the local market and the credit profile of the borrower.  

The qualification requirements for each of the main options only have slight differences. For all three of them, you will typically need to be a prime borrower with some collateral. Usually if you meet the qualifications for one, you will most likely meet the qualifications for the others. Typically we look for:

1. Debt Service Coverage Ratio of 1.20, or greater.
2. Cash down payment of at least 15%, but can be as high as 30%
3. Credit Score of 650 or greater
4. Show competency to operate facility
5. No recent bankruptcies, tax liens, or foreclosures within 5 to 7 years

New Construction Loan Options:

Typically construction costs can range is from $1,000,000 to $50,000,000. SBA loans are especially good for self-storage facilities because you can finance all of the construction interest and up to 2 years of loan payments. SBA will finance up to 5 million per one borrower. Market studies are critical for a lender to take an interest in doing a loan.

Acquisition Loans:

Acquisition loans are needed when you’re looking to acquire an existing self-storage facility. If you are buying a self-storage business for the first time, chances are you’ll need to use the SBA or have more of a down payment. These loans can be fixed from 5 to 15 years and be amortized over 25 to 30 years. Rates will range depending on market timing and property condition.

Renovation Loan:

It’s common within the industry to reconfigure existing self-storage facilities. If you have an influx of customers wanting to rent out room, but your available units are being used, you may want to reconfigure some units to make more available.  

Renovation loan size can vary greatly. This is mostly dependent on what type of facility you have and the extent of the remodeling needed to be done. We have great bridge programs to help you with your success!

Whatever your loan needs for a storage units are, Integrity Capital is here to help. Call today, and let's discuss: 480-219-1205.