Using the SBA 7(a) for a Self-Storage Facility

Self-storage revenue in the United States is projected to grow at an average annual rate of 2.9% through 2020. Growth is good news for lenders and borrowers, and now might be the time to take on a business mortgage.

The SBA 7(a) loan can be used for commercial real estate; the straightforward eligibility requirements make it appealing to business owners. Banks, credit unions, and traditional lending institutions offer the SBA 7(a), and 75% of the money is guaranteed for loans of up to $5 million.

What SBA 7(a) Loans Can Be Used For in Self Storage

Practically any legitimate business purpose is covered by the SBA 7(a). Here’s a look at some of the things you can do with the loan:

New Construction of a Self-Storage Facility

Any of the costs associated with new construction can be covered by the SBA 7(a): bay doors, large concrete plots, alarms and security gates, etc.

Refinancing a Self-Storage Facility

The funds from the SBA 7(a) can be used to refinance an existing loan. There are specific conditions for the loan to be used this way; for more information, check out our page on Refinancing Debt.

Buying an Existing Self-Storage Facility

Self-storage facilities are purpose-built, and you may find it cheaper to buy a vacant site rather than to build. The SBA 7(a) allows for the purchase of commercial real estate and land.

Helpful Resource: The Top Uses for the SBA 7(a) Loan

SBA 504 Loans for Self-Storage Properties

Our team works with business owners on other government-backed loan programs as well. The SBA 504 is another loan that's larger than the SBA 7(a). The 504 can have more favorable terms, including a lower amount down and lower interest rates. Typically, the SBA 504 is used with a traditional loan, with the costs split between the two.

Case Study: Buying a Self-Storage Property in Utah

Angelica, an entrepreneur in Provo, Utah, discovered an opportunity to purchase an existing self-storage facility with great potential for growth. She needed financing not only for the acquisition of the facility but also for working capital to manage and expand the business.

She initially considered the SBA 504 loan, which offers competitive fixed interest rates and long repayment terms. However, after researching the loan programs and discussing her options with an SBA lender, she decided to apply for an SBA 7(a) loan instead. The 7(a) loan provided her with more flexibility in terms of loan usage, as it could be used for both acquiring the facility and providing working capital. In contrast, the SBA 504 loan primarily focuses on fixed asset financing, such as purchasing land, buildings, or equipment.

Angelica applied for a $1.2 million SBA 7(a) loan, which allowed her to cover the costs of purchasing the self-storage facility and provided the working capital she needed for ongoing operations and potential expansion. With the flexibility and favorable terms of the 7(a) loan, Angelica successfully acquired and began managing her new self-storage facility, well positioned for growth.

This is a fictional case study provided for illustrative purposes.

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