How to Get a Loan to Build Storage Units in Texas
November 18, 2022
People and businesses own more property than ever before, so there is a growing market for storage businesses in Texas where furniture, mementos, heirlooms, collectibles, or small business inventory can be safely kept. As a result, business owners and managers are trying to meet this demand by investing in the storage industry and constructing storage unit facilities.
The process of building a storage facility begins with having the financing available to cover the purchase of land and building construction. Learn how to get a loan to build storage units, the different bank loan options available, and why Texas Gulf Bank is the perfect banking partner to build a potentially successful storage business.
Loan Options for the Storage Business
Various financing options are available for developers or investors interested in the storage business. The first step is determining which type of self-storage facility you plan to construct. Storage facility options can include the following:
- Indoor climate-controlled facilities
- Drive-up storage
- Business storage
- 24-hour storage
- Boat/RV storage lots
The next step is evaluating which lending option is best for your business, whether you’re buying land, constructing storage units, acquiring a property, or expanding an existing self-storage business.
SBA Loans
Owners that are new to the storage unit business could apply for a Small Business Administration loan(SBA), a business loan partially guaranteed by the federal government’s Small Business Administration.
SBA loans are designed to help small businesses access the financing needed for a wide range of business purposes, such as buying commercial real estate, construction, or expansion on owner occupied.
– SBA 7(a) loans are one of the most popular self-storage lending programs because they typically offer favorable loan terms and a loan amount of up to $5 million to ensure you have the funding needed for your project. Loan funds can be used for land and building purchases, building construction, and refinancing of the same.
– SBA 504 loans offer eligible borrowers fixed interest rates for long-term loans over $5 million for similar purposes as the 7(a) loan.
SBA loans typically have lower down payment requirements, longer terms, lower monthly payments and are fully amortizing, (no balloon payment due at the end of the loan term).
SBA loans are an ideal option for financing if you might not qualify for conventional loans from storage lenders. In addition, the SBA does not require your company to have self-storage industry experience to qualify for loan approval – just proven business expertise or a history of successful property ownership/management.
Construction Loans
If you have an established business history in self-storage and need financing for constructing a new storage unit facility, a conventional construction loan may be the best fit for your project needs. A construction loan is a traditional funding solution that can be used for new build construction, expansions, or building renovations on an existing property.
Construction loans allow you to have the funding needed to cover all construction costs while also giving you the option to finance the interest, closing costs, and even the first two years of payments.
The repayment option in a construction loan may be especially helpful for self-storage companies that need time to increase occupancy rates and generate steady income, which can take a longer amount of time than other industries.
A business construction loan will typically include terms ranging from 12 to 18 months, require a down payment of at least 25%, and have the option to automatically convert into a permanent mortgage once construction is complete.
How to Qualify for Storage Unit Construction Loans
The ideal candidate applying for a loan to build storage unit facilities is an experienced owner/manager of a business, particularly an owner/manager of existing storage facilities.
Applicants new to the storage industry must demonstrate strong financial capacity and good credit, as defined by TGB underwriting guidelines, with no recent tax liens, foreclosures, or bankruptcies.
If you plan to apply for financing through Texas Gulf Bank, we will require that you complete an initial assessment for loan viability. During the assessment, we will review the financial performance of your business, as well as the value of the real estate, market feasibility, and each borrower’s and guarantor’s credit profile.
In addition, a property study will need to be completed to review the following aspects of the land where the storage units will be constructed:
- Plot of land
- Purchase price
- Property title
- Utility access
- Zoning restrictions
Once a property study and an initial assessment are completed, applicants can begin the loan application process for storage facility construction.
Choose Texas Gulf Bank for Storage Lending Needs
Texas Gulf Bank has proudly served the Gulf Coast community for over 100 years by providing small businesses with effective, reliable financing solutions. Our team of experienced loan officers offer exceptional client service and have an in-depth understanding of many industries throughout the region, including the storage industry.
If you are interested in constructing a storage facility and need funding, contact Texas Gulf Bank to start the application process. After completing an initial loan assessment, applicants will need to submit financial documentation including, but not limited to:
- Completed loan application
- Three years of business tax returns
- Three years of personal tax returns for all loan guarantors
- Three years of business and personal financial statements
- Current profit and loss statements
- Existing debt schedules
- Financial pro forma for expected revenue, operating costs, and cash flow
- Occupancy reports and current rent roll for acquisitions
- Construction budget
- Builder contract
- Building permits
Our expedited loan application process and our in-house review typically means a shorter wait time, and if approved, your business will gain a competitive advantage by having faster access to funds to complete your storage facility construction projects.
If you are interested in learning how to get a loan to build storage units, connect with a TGB loan officer today. You can complete the form above to get started.
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All Loans Subject to Credit Approval