6 Best Self-storage Loan Providers
This article is part of a larger series on Business Financing.
Business owners looking to acquire, repair, or fix and flip a self-storage property have many options for loan types and lenders to choose from to obtain financing. Whether the plan is to purchase a self-storage unit and finance it for 25 years or sell it off after renovations, our guide will help you find the type of loan that’s best for your needs.
The list below includes the best providers for each type of self-storage loan and what each type of loan is best used for:
- Wells Fargo: Conventional bank loans for prime borrowers who have a high net worth
- Live Oak Bank: SBA 7(a) loans for smaller self-storage loan projects involving commercial real estate
- Lendio: SBA 504 loans for larger projects where borrowers may struggle getting a conventional bank loan
- AVANA Capital: Commercial bridge loans for short-term financing to cover a period of time between two loans
- Bluevine: Lines of credit for recurring working capital needs and small renovation projects
- Kiavi: Hard money loans for short-term financing for borrowers with unfavorable credit and/or properties in disrepair
Wells Fargo: Best for Conventional Bank Loans
For commercial real estate borrowers looking for a conventional bank mortgage loan, Wells Fargo is an excellent choice. Wells Fargo provides funding of up to $1 million for five and 10 years, although it can go up to 20 years for larger projects.
On the negative side, Wells Fargo does require the potential borrower to deposit $1,000 when accepting the conditional approval of any loan or line of credit. It’s nonrefundable if the loan doesn’t close, but if the loan is closed, it’s applied to any applicable fees due at closing. Any unused portion of the deposit is credited to the borrower after closing.
Also, if you pay the loan off within three years, there’s a prepayment penalty of 3% of the principal amount prepaid.
With no years-in-business requirements, Wells Fargo is a good choice for those looking for their first self-storage loan. You can apply for a self-storage loan through the Wells Fargo website or at your local branch. Contact Wells Fargo to be set up with a lending specialist to get started.
LTV ratio: The ratio between the amount of the loan and the appraised value of the property. Calculate it by dividing the loan amount by the appraised value, then multiply by 100 or convert to a percentage. Example: $80,000 loan/$100,000 value = 80% loan to value.
DSCR: The ratio between a business’ annual net operating income and the current year’s debt obligations. Calculate it by dividing the operating income by the debt obligations. Example: $100,000 net operating income/$40,000 debt obligations = 2.50 DSCR.
Live Oak: Best for SBA 7(a) Loans for Commercial Real Estate
When planning on going with an SBA 7(a) loan, there are many requirements specific to Small Business Administration loans. Therefore, we encourage you to check out our article on SBA 7(a) loans before beginning the application process to make sure you know what to expect.
Rates on SBA loans tend to be lower than online lenders’ rates and traditional bank rates because of the SBA guarantee. You can get financing of up to $5 million for up to 25 years. One other advantage over a traditional bank loan is being able to have a loan-to-value of up to 90%, reducing the down payment required.
There’s a prepayment penalty for loans with a term greater than 15 years if you prepay more than 25% of your loan in the first three years. The fee is charged against the amount you prepaid and is 5% for prepayments in year one, 3% in year two, and 1% in year three.
Live Oak Bank is the top provider nationally for SBA 7(a) loans. It has a dedicated staff that handles self-storage financing. You can apply for self-storage financing with an SBA 7(a) loan directly from their website. Visit Live Oak Bank’s website to get the process started.
Lendio: Best for SBA 504 Loans
An SBA 504 loan is actually a combination loan. One comes from a lender and one from a nonprofit lender known as a community development corporation (CDC). Both loans are closed simultaneously. SBA 504 loans are good choices because they offer up to $14 million in financing for up to 25 years. Like SBA 7(a) loans, SBA 504 loans allow the borrower to go up to 90% loan to value, reducing the down payment compared to a traditional loan.
Our guide on SBA 504 loans goes through the requirements and qualifications needed for the loan. Important guidelines to remember before applying for an SBA 504 loan for self-storage financing include:
- Property must be owner-occupied
- Jobs must be created
- Business must have a net worth of less than $15 million
Lendio is an excellent choice for SBA 504 loans. Lendio is a broker that can match you up with an SBA 504 lender that specializes in self-storage loans. Check out its website for more information.
AVANA Capital: Best for Commercial Bridge Loans
For borrowers looking for a short-term loan to renovate a self-storage unit for a possible sale or later permanent financing, a commercial bridge loan is a good option. AVANA Capital provides bridge loans from $3 million to $25 million for between 12 and 36 months. The down payment for a bridge loan is higher—up to 25% of the purchase price. In addition to funding renovations and upgrades, commercial bridge loans are good for borrowers who cannot initially qualify for permanent financing.
AVANA Capital is a good choice due to the high maximum loan amount, competitive rates among bridge loan providers, and quick preapproval and turnaround times. You can apply for a commercial bridge loan right from AVANA Capital’s website. Visit AVANA Capital’s website to get started.
Bluevine: Best for a Business Line of Credit
For borrowers looking to establish a business line of credit that could help with renovations and ongoing expenses surrounding self-storage buildings, Bluevine is an ideal choice. An advantage with a line of credit is that you only pay interest on the amount you use, so a line of credit is handy to have even if you don’t have immediate capital needs.
Bluevine offers same-day funding for lines of credit up to $250,000, with interest rates between 6.2% and 7.8%. You can apply directly on Bluevine’s website and have access to the line of credit later that day. Stop by Bluevine’s website to get the application process started.
Kiave: Best for Hard Money Loans
In addition to bridge loans being a good option for those wanting to fix and flip a self-storage facility, hard money loans can also allow you the same option. Hard money loans are typically saved for businesses that cannot get funding from other traditional lenders, either due to credit issues or properties in disrepair. In addition, traditional lenders usually have better rates for longer terms, while hard money lenders offer more rapid funding times.
Kiavi can provide hard money loans of up to $3 million for 12 months with funding in just five to 15 days. Kiavi can fund first-time flippers (0 to 5 flips in 24 months), but experienced flippers (5 or more flips in 24 months) will get better rates and a dedicated manager. Visit Kiavi’s website for more information.
How We Evaluated the Best Self-storage Loan Providers
First, we evaluated each type of loan and determined which was the best option for self-storage loans based on the ease of application, the qualifications required, and the interest rates and terms available to the borrower. SBA loans are outstanding loans, but they are typically the most complicated to apply for and obtain. This is why conventional mortgage loans are the top choice because of how easy they are to get compared to the other loan types on this list.
Then, we evaluated each type of loan and determined the lender that was the best option for that type of loan. We again compared the ease of application, the qualifications required, and the interest rates and terms available.
Bottom Line
There are a wide variety of loan types and lenders available for self-storage loans. When deciding which type of self-storage financing is right for you, be sure to consider your budget and timeline. Some loan types on the list will take longer than others to fund but may offer better interest rates and longer terms. Conventional loans and SBA 7(a) and 504 loans are the best choices on this list for most self-storage financing.
