Warehouses or storage rooms of various properties are currently attractive investments in the investment property markets. In the US market, the demand for financing this type of real estate has been consistently high for a number of years, and investors (buyers) are ready to buy such real estate at a capitalization rate of 5-7%. The attraction of self-storage (purchasing a mini-storage) is that the costs of maintaining such a property can be low, and the income from its use or subsequent sale can be quite high. To finance the construction or purchase of such a mini-storage facility, you can use self-storage online loans provided for such purposes by various lenders. However, finding such a lender may not always be an easy task. This is because not all of them are experienced warehousing finance lenders and there are many lending programs available for warehouse space, a detailed study of which will allow you to choose the loan terms that will bring you closer to achieving your financial goals in a short time.

Online Personal Loans for Storage Facilities

Personal Loans from online lenders are the fastest and easiest way to get money for any needs including storage. Whenever you lack financing to pay for a storage unit, or buy one at the auction, or you might plan a startup and build storage units, you can apply online and get $5,000 - $35K within 1 - 2 business days.

The benefits of Online Personal Loans are:

  • a simple application online
  • quick approval same day
  • availability for all credit score types
  • no collateral is required
  • instant funding on the next business day

Loans From Local Banks or Credit Unions

Almost every bank has its own retail network, which has a geographical limitation. This means that many banks are willing to lend and provide additional banking services only to local borrowers, which limits the possibility of such lending. This source of financing for warehouse space has both advantages and disadvantages.

The main advantages of this source of funding are:

  • some local lenders work with real estate, which has a higher credit value, respectively, the amount of the loan will be higher;
  • banks and credit unions offer low prepayment penalties, which implies a shorter fixed interest rate;
  • such lenders almost always require a personal guarantee or may offer a partial guarantee, depending on the credit value of the property;
  • commissions are usually lower.

The disadvantages of such a source of financing for the acquisition or construction of storage facilities are:

  • banks and credit unions offer long-term (15 to 20 year) self-custody loans, which can significantly reduce your income from owning such property;
  • fixed rates can be set for a limited period (3, 5 and maximum 7 years).

Small Business Association (SBA) Loans

These SBA self-storage loans are a type of public small business loan that is issued by private lenders but backed by the federal government. The SBA has several loan programs designed, among other things, for the purchase of real estate. This is a good solution for those looking to refinance, purchase or build their own vault or mini vault as SBA financing offers a high level of leverage. Such a source of financing for warehouse space also has both advantages and disadvantages.

The main advantages of such lending for storage facilities:

  • longer loan terms (up to 25 years, plus the construction period may be included in the loan term);
  • such loans have lower down payment requirements - usually 10% for own storage, 5% - for refinancing, buying and building if you have a stable source of income;
  • such financing can be used not only for the acquisition and construction, but also for the modernization or reconstruction of mini-warehouses under a simplified program if you have a good credit history.

The main disadvantage of this type of financing is the presence of a personal guarantee, which may be required to open a line of credit.

USDA Rural

Such loans are offered to owners or potential owners of rural property. The main advantages of such lending for storage facilities:

  • the possibility of obtaining a loan for self-storage in a small village, where most traditional lenders do not consider lending to potential borrowers;
  • the interest rate for using such a loan is fixed for shorter interim periods (1, 3, 5 years), and then it is revised;
  • warehouses have a 30-year depreciation (whereas conventional loans have a 20-year depreciation for warehouses).

The disadvantages of such a source of financing for the acquisition or construction of storage facilities are:

  • the presence of commission fees, which is 2-3% of the loan amount and is paid in advance to cover government spending;
  • low availability of such loans due to the limitation of credit resources allocated for these purposes to the US Department of Agriculture;
  • long-term loan. It sometimes takes 75-90 days to secure, obtain approval from government agencies and close the issue of such lending.

Vendor Financing

Some storage facilities currently offered on the real estate market have the option of obtaining financing directly from the seller. As a rule, such financing involves an initial payment of 40-50% of the credit value of the property. The interest rate on such a loan is 7-8%, the loan term is 3-10 years.

Benefits of this loan:

  • the warehouse buyer does not qualify through the bank, which can help if you, as a lender, have a bad credit history;
  • sellers may want to install the payment amount, i.e. receive a monthly payment over an extended period of time instead of a single lump sum of money, especially in situations where occupancy is low.

Disadvantages of such loans:

  • interest rates on such loans are usually higher;
  • these loans require a large down payment (40-50% of the purchase price of the property).

How Do I Choose The Best Funding Source To Meet My Storage Loans Financial Needs?

There are many lenders in the warehouse space market. Our task is to determine which one suits us best. This may require studying a large amount of information related to this type of lending. A good way out, no doubt, is to find a loan broker and work with him. An experienced loan broker works with many institutions and is familiar with a large number of warehouse financing programs. In addition, an experienced loan broker will assist in the collection of loan documents required to obtain a loan. With a complete package of such documents, you will be able to access the best financing options. By hiring a loan broker, you will get not only a financial expert but also a whole team of like-minded people who will work in your interests. They will help you determine the scenario that best suits your financial goals, negotiates with the lender, if necessary, options for prepayment penalties, fees, amortization, and a range of other loan terms. The loan brokerage company will work with you every step of the way until the loan is funded. Often there are unknown conditions that are impossible to cope with on your own due to the lack of necessary knowledge, and such a team of professionals will eliminate potential violations of the terms of the transaction.