SBA Lending: A Primer for Self-Storage Borrowers

The Small Business Association (SBA) offers lending programs that are often mistakenly thought of by self-storage operators as cumbersome, last-resort loan options. Much of this misperception is generated by experiences with banks that don’t specialize in SBA lending, aren’t preferred SBA lenders, or lack lending expertise and experience in the storage industry. Let’s take a closer look at SBA loans, including some of the advantages they provide and tips for securing financing.

Advantages of SBA Loans

An SBA loan can provide advantages for the self-storage borrower. In an SBA program, the loan is made by a bank, but the debt is partially guaranteed by the SBA. This allows the bank to provide credit for a borrower who may otherwise have difficulty obtaining a loan with favorable terms. SBA loans tend to be borrower-friendly as well as flexible to equity and collateral requirements. They also have no loan covenants, and longer terms with no balloons.

For example, a conventional loan may have a 10- or 20-year amortization with a balloon in three to five years, while an SBA loan will have an amortization and term of 25 years. The SBA acts like an insurance company, allowing the bank to extend its conventional credit reach.

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