SBA 504 Loans for Self-Storage Facilities
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 then that the industry is expected to generate an incredible $37 billion in 2018, and has grown at an aggressive 3.7% since 201
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesBuilding 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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Related Questions
What are the eligibility requirements for SBA 504 loans for self-storage facilities?
In order to be eligible for an SBA 504 loan for self-storage facilities, you must meet the following criteria:
- You must be a for-profit business
- You must have a tangible net worth of less than $15 million
- You must have an average net income of less than $5 million over the past two years
- You must use the loan for the purchase, construction, or renovation of a self-storage facility
For more information, please visit the SBA website.
What are the benefits of SBA 504 loans for self-storage facilities?
The SBA 504 loan program offers a number of benefits for self-storage facilities. These include:
- Low down payment: The SBA 504 loan program requires only 10% down payment, which is much lower than traditional commercial real estate loans.
- Long-term fixed rate: The SBA 504 loan program offers long-term fixed rates, which can help you manage your cash flow and budget for the future.
- Flexible terms: The SBA 504 loan program offers flexible terms, allowing you to tailor the loan to your specific needs.
- No prepayment penalty: The SBA 504 loan program does not have a prepayment penalty, allowing you to pay off the loan early if you choose.
For more information on the SBA 504 loan program, please visit sba504.loans.
What are the maximum loan amounts for SBA 504 loans for self-storage facilities?
The maximum loan amount for SBA 504 loans for self-storage facilities is $5 million. This amount is divided into two parts: a first mortgage loan of up to $4 million and a second mortgage loan of up to $1 million. The first mortgage loan is provided by a Certified Development Company (CDC) and is typically 50% of the total project cost. The second mortgage loan is provided by a commercial lender and is typically 40% of the total project cost. The remaining 10% is provided by the borrower as equity.
For more information, please visit SBA 504 Loans for Self-Storage Facilities.
What are the interest rates for SBA 504 loans for self-storage facilities?
SBA 504 loans for self-storage facilities are offered with significantly lower interest rates (around 5%) than conventional SBA 7(a) loans (typically between 7.5 and 11%).
SourceWhat are the repayment terms for SBA 504 loans for self-storage facilities?
The repayment terms for SBA 504 loans for self-storage facilities depend on the loan amount and the type of loan. Generally, the loan term is 10 or 20 years for real estate and 10 years for equipment. The interest rate is fixed for the life of the loan and is based on the market rate at the time of loan approval. The SBA 504 loan also requires a 10% down payment from the borrower. For more information, please visit https://www.sba.gov/funding-programs/loans/sba-504-loan-program.