Where’s the Money? An SBA loan might be right for you!

You did it! You did everything right and you found the perfect property. Now you need to find the money for your perfect self-storage investment property. If you don’t already have a lender on your power team that does SBA loans, you want to find someone who does. An SBA loan is a great way to get into a property with only 10% down. You might have more money, but money is so inexpensive right now, you might want to keep what you have so that you can purchase more properties.

The way that an SBA loan works it that you go into a commercial lender and you apply for a loan. Instead of having one lender give you 75% of the value of the property, you have a bank give you 50% of the value of the property. SBA then funds the next 40% in a second lien position. You bring in the remaining 10%.

There are many reasons why you would want to consider and SBA loan. The first is that you only have to put down 10% of the purchase price instead of the normal 25%-35% down. This allows you to use the cash that you do have to purchase more properties. It also allows you to use the cash that you have as a payment buffer if this is a fixer upper or to do any needed repairs.

Another reason to do an SBA loan is that instead of having to refinance every 5-7 years, it is a fixed loan for 25 years. That means that you can lock in the incredibly low interest rates that are available today and keep them for the life of your loan. You will still have to refinance the other portion of your loan, but that is only 50% of the purchase price instead of the entire amount.

In addition, you can often fund some of the equipment that you might need to get your business going. If you are doing a building conversion, this can be very helpful in setting up your office and display area. The money for these items only comes out of your pocket at 10% instead of 100%.

To qualify for an SBA loan, you have to have great credit, you cannot have had a bankruptcy in the past and you have to qualify for the regular loan that you are applying for. There are some other stipulations that are required to get the loan, but you should definitely talk to your lender about the advantages of an SBA loan for your project. As always, Happy Investing.