By Beau Eckstein

November 18, 2022

SBA 7a, self-storage

In this blog post, you are going to learn how to buy a self-storage facility using an SBA loan.

Question: I want to buy a self storage facility using the SBA loan program. 

This will be my first one. 

  • What will the SBA look at to qualify me? 
  • How do I know how much I can qualify for? 
  • My FICO is about 700. 

I have a couple hundred thousand to invest.

Answer: 

For acquiring a self storage facility, you can use either the SBA 7a loan program or the SBA 504 loan program.

Which one you choose depends on a number of factors.

Generally speaking, for a business acquisition loan, you’ll want to use an SBA 7a because you can also borrow for working capital. You can also finance the financing costs.

The SBA 7a can be used to purchase the land and business as well as operating capital for employee compensation, whereas the SBA 504 will just finance the actual facility and none of the working capital. So we first look at that.

Then we look at the equity injection needed. You have $200,000. You need some reserve, so you can't use all that if you don't have any additional reserves, so typically we're going to first look at the business itself.

Here are a few questions we will need to answer:

  • Does it cash flow? 
  • Does it make sense from a financial position? 
  • What is your borrowing capacity? 

You can also be gifted on these type of transactions, so you could have a family member gift you part of the down payment. 

So it's really an “it depends” situation.

You might be able to get some gift equity for the equity injection, or down payment, and you can also potentially get the seller to finance on a seller carry and if they put at least five percent on standby, then you only need to bring in five percent equity injection.

There are a lot of variables, and it depends on your capability to borrow from or to get down payment or gifts from your family and friends.

So to answer your question: you're going to need a ten percent equity injection. You might be able to get five percent on standby from the seller. You are also going to need a couple months of reserves. You're going to need to show good borrowing capacity. But it looks like an SBA 7a loan will do the job!

You would essentially on paper be able to finance nearly two million dollars with some reserves.

We can dive deeper into your project – book a call today with one of our commercial loan advisors today.

You can watch this video to learn more about buying a self-storage business:

Read more about financing a self-storage business here:

https://sbaloans.blog/small-business-loans/small-business-loans-for-the-self-storage-business/

Working with Beau Eckstein as your commercial mortgage advisor when trying to locate the best SBA financing can be beneficial because he has extensive experience and knowledge in the field. He can help navigate the complex process of obtaining SBA financing and assist in finding the best options for your specific situation.

Additionally, his established relationships with lenders can help increase the chances of getting approved for funding.

Overall, working with a knowledgeable and experienced advisor like Beau Eckstein can greatly increase the chances of successfully obtaining SBA financing.

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