by John Stevens
November 5, 2010 11:24 AM
The U.S. Small Business Administration (SBA) has finally opened its arms to the self storage industry, changing its loan guidelines and now making such businesses eligible to apply for loans that were never open to them before.
Because self storage is considered a “passive income” property, it was included in a ruling that not only includes self storage, but also mobile-home parks, office suites, shopping centers and similar businesses. “Passive income” properties are those which rely on rental income and the owner controls both entry and exit. In the past, self storage facilities were only eligible for loans if more than 50 percent of the business came from sources other than monthly rent.
The new self storage guidelines also coincide with a higher SBA 7a loan and eligibility limits, a new higher 504 loan and eligibility limits, an extension of the SBA fee waiver, and a temporary 90 percent SBA guarantee. The SBA is professing that now is an “almost ideal” time to apply for an SBA loan because it will take only 30 to 60 days to close and the fee waivers could run out sooner than the end of the year.
Construction loans for the self storage business will continue to be difficult to obtain in the near future because lenders are more willing to fund refinances, acquisitions and expansions of existing profitable businesses.
The benefits to using SBA loans are numerous. One major benefit is SBA financing can be used to acquire or refinance multiple self storage businesses. SBA eligibility is determined by the total amount used, which now goes to $5 million. It is $5.5 million for green energy or energy efficient buildings. Also, long term loans of up to 20 to 25 years are available if collateralized. SBA loans have lower equity and down-payment requirements (15%). SBA financing can be used for improvements to buildings and working capital. Business debt consolidation is also available.
An act passed in September extended an SBA loan-fee waiver and kept SBA loan guarantee limits higher. The result seems to be the stimulation of small-business loan issuance.
“By unlocking loans for (the nation’s) small businesses, we are providing them with the tools they need to grow their business and create new jobs in their local communities,” said SBA administrator Karen Mills in a blog for the White House, which was then reported on the Young Money website.
Sources Used:
“SBA Self-Storage, Mini-Storage and Mini Warehouse Financing.” My Mortgage Banker.com. 2010.
“Self-Storage Now Eligible for SBA Loans.” ISS Inside Self Storage. Nov. 3, 2010.
SBA Backs Thousands of Small Business Loans.” Young Money. Nov. 3, 2010.