Self Storage Financing: Best Business Loan Options to Consider

While self-storage construction can be expensive, that’s just one of many expenses that needs to be covered. Once you’ve built the facility, you must make sure that everything stays in working order to keep your clients’ belongings safe. That includes maintaining and replacing damaged rolling doors, climate control systems, security cameras, and protective fencing, just to name a few.

The good news is there’s a variety of small business loans for self-storage facilities to help you manage the costs of running your business. This detailed overview will help you assess the best options to find one that meets your needs.

To find the best financing option for your self-storage business, you’ll need to do a research and compare lenders. In this review, our experts highlight the terms, rates and fees of each lender and explain what makes them a good option. We also share potential downsides of each lender, and provide a rating methodology you can use to select the best option for your needs.

Self Storage Financing: Full Overview of The Best Options

In this section, you’ll find detailed descriptions on some of the best options for self-storage financing.

How To Choose the Best Self-Storage Loan

• Loan Features: Make sure to check the loan features including loan terms, repayment optionality, and loan amounts to find self-storage financing that meets your needs. For example, if you’re building a new self-storage facility and have to borrow several million dollars, you can eliminate lenders that only offer low lending amounts.
• Application Process: The application requirements vary from lender to lender; some may require a hard credit pull and in-depth financial documentation while others can make an offer with a soft credit pull and basic business information. If you need cash quickly to cover unexpected repairs or operational costs at your storage facility, work with a lender that offers a fast, noninvasive application process and quick disbursement.
• Interest Rates and Fees: Before applying with a lender, you should have a basic idea of how large of a loan repayment you can afford. The size of your repayment is typically determined by how much you borrow, interest rates, term length, and additional fees. Apply only to lenders whose rates you can afford and avoid those that will strain your budget.
• Qualification Process: You should also take loan qualifications into account as you evaluate your options; do you meet the lender’s minimum credit score, annual revenue, and business history requirements? If your self-storage unit has only been open for six months and the lender’s minimum requirement is one year, you should look for other options.
• Customer Support: Having access to customer support is also vital; at some point during the life of your self-storage loan, you’ll probably need assistance. Make sure the lender offers multi-channel access to a live Customer Service Representative plus supplemental information and tools on their website.
• Online User Reviews: Check customer ratings and reviews, especially on independent sites like Trustpilot. Other borrowers will let you know what to expect from the lender, if they had any issues with their storage unit financing, if they recommend the lender, etc.
• Perks and Bonuses: You should also take into account any additional perks and bonuses the lender may offer, such as payment flexibility, advanced technology, and advertising transparency. For example, if the lender requires you repay your self-storage loans every week, but you want to pay monthly, consider applying with a different provider.

What Are the Costs of Running a Self-Storage Business?

There are several costs to consider when planning your own self-storage business. including:

• Land: If you’re starting your self-storage business from scratch (as opposed to purchasing one that’s already in operation) one of the biggest expenses will be acquiring land to build on—this could run you anywhere from $100,000 to $400,000 depending on your location.
• Construction: Construction costs are another major expense; to build your storage units, you’ll likely need between $1,250,000 and $3,750,000 for a 50,000 square foot facility.
• Other Construction-Related Expenses: In addition to the cost of construction, you’ll also need to pay related expenses such as engineering and architecture fees, land surveys and soil testing, legal fees, builder’s insurance, and permits. These can add up to around $80,000.
• Office Equipment: When tallying costs, you should also include any equipment necessary to run your self-storage business, including computers, printers, telephones, filing cabinets, and software, which can reach $2,000 or more.
• Marketing: Once your facility has been built, you’ll need to advertise your services to the local community to attract customers. This should include a professional website plus ads through either radio, TV, newspaper, mail flyer, or email. Marketing can cost you several thousand dollars, depending on which avenues you select.
• Operating Expenses: Don’t forget to add operating expenses into your total. This includes things like wages, loan payments, insurance, utilities, maintenance, property taxes, and security, which can add up to $5,000 or more per month.

Types of Loans Available to Self-Storage Facility Owners

Some of the most common types of loans for a self-storage business include:

• SBA Loans: These loans are backed by the Small Business Administration and often offer low APRs with extended repayment terms; however, applying can be difficult due to a high standard for qualification and required documentation.
• Commercial Real Estate Loans: The purpose of these loans is to provide financing for the purchase of land and construction of your self-storage unit. Maximum loan amounts are typically high but other features will vary based on the lender and your credit profile.
• Start-Up Loans: Start-up loans were designed to provide cash to businesses that are just starting out. Because it’s riskier to lend to companies with a limited business history, these may incur higher interest rates.
• Business Line of Credit: A business line of credit is a great option for self-storage owners who are looking for maximum flexibility; you can draw money against your line of credit for any purpose whenever you need a quick influx of cash.
• Short-Term Loans: Short term business loans are ideal when you find yourself with unexpected expenses, like emergency repairs. These loans often have high APRs and need to be repaid within the year.
• Working Capital Loans: Working capital loans are designed to help cover the cost of running your business. These are especially useful whenever you experience unforeseen gaps in your cash flow. Loan features on working capital loans vary by lender, so shop around to find one that best meets your needs.

You can get these loans through several different avenues, including a bank, credit union, or alternative lender. While you may find lower APRs and longer lending terms at banks and credit unions, their loan qualifications are much more rigorous, which can make it difficult to secure the funding you need to build your self-storage business.

How to Use a Self-Storage Financing?

There are various ways you can use financing for self-storage facilities, such as:

• Acquisition: you can use self-storage financing to purchase a facility that’s already been built and has been running for several years. Though most acquisitions of already-existing storage facilities are done by investment firms, there may be local, independent self-storage units that come up for sale from time to time.
• Construction: Self-storage financing can also be used if you’re planning on constructing a new facility (as opposed to acquiring a used one). Keep in mind, you’ll need to find a lender that offers high loan limits because construction costs can run into the millions of dollars.
• Expansion: You can also take out loans to expand your current self-storage business. These loans can cover practically any type of expansion including adding more units, building a new facility, hiring more staff, or improving security features.
• Renovation: Some of the more common renovations that owners seek funding for are rolling door replacement, reconfiguring storage space, the installation of climate control systems, adding keypad entry, and improving curb appeal.
• Maintenance: Financing can also be secured to help with maintenance of your storage facility. For example, you may need to patch up cracks in the wall or add a new coat of paint onto the exterior.

How to Qualify for a Self-Storage Financing?

Here are a few tips to improve your chances of qualifying for a self-storage business loan.

• Know how much money you need and how it will be used.
• Understand your own credit profile.
• Decide how much you’re willing to spend in monthly payments.
• Prepare the necessary documents.
  • A current profit and loss statement
  • Three years of business and personal tax returns
  • A report on occupancy and rental rates
  • A copy of your business plan
  • A market feasibly report if the loan is for new construction
• Apply for loans that match your needs and qualifications.

Conclusion

Operating a self-storage facility is a lucrative business opportunity that has been increasing in popularity over the past several years. Whether you’re acquiring an already-existing storage unit, building a new facility, or updating your current one, there is a wide range of self-storage financing options available to you. All you need to do is evaluate your options and find the one that best meets the needs of your business.