SBA 504 Loans for Self-Storage Facilities

Building Self-Storage Facilities with 504 Loans

In the last few decades, self-storage has become an enormous industry in the US. Today, almost every American town has at least one decent-sized self-storage facility. It should be no surprise then that the industry is expected to generate an incredible $37 billion in 2018, and has grown at an aggressive 3.7% since 2013. This high rate of growth makes it a great time for self-storage entrepreneurs to expand their businesses, and SBA 504 loans could be a great way for them to get the funding they need to spread their wings.

How Self-Storage Facilities Use SBA 504 Loans

SBA 504 loans are specifically intended for the purchase and improvement of commercial real estate, as well as for the construction of new buildings. With this loan, you can build anything from basic self-storage units to top-of-the-line air conditioned facilities. You can also use them install security fences and monitoring systems, as well as to purchase any long-term equipment you might need for your business.

The Benefits and Restrictions of SBA 504 Loans for Self-Storage Facilities

Self-storage business owners love SBA 504 loans, as they are offered with significantly lower interest rates (around 5%), than conventional SBA 7(a) loans (typically between 7.5 and 11%.) This makes them less expensive over the long run, especially as they also carry less fees than 7(a) loans.

However, it’s important to remember that SBA 504 loans are restricted to the purchase, improvement and construction of commercial real estate, and the purchase of long-term equipment (defined as equipment that will be in use for at least 10 years.) 504 loans cannot be used for working capital (i.e. to pay temporary costs, such as marketing, disposable equipment, employee salaries, utilities, or general business expenses). If you need a working capital loan, you may be better suited toward the 7(a) loan program, or, alternatively, another SBA loan, such as the SBA express loan, or even an SBA microloan.


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