SBA loan guidelines were changed recently to allow self storage/mini storage or mini warehouse businesses as an eligible business type.
Previously self storage facilities were only eligible if more than 50% of the business revenue came from sources other than monthly rents or from what the SBA considered “sufficient services.” For instance, a U-Haul Self Storage business with a mini storage and a rental business had a decent chance at being eligible under the old guidelines.
Businesses with “Passive Income” Now Eligible
The new SBA guidelines now say that a business with “passive income” (i.e. rental income) where the owner controls both entry and exit are eligible and this now makes almost all mini storage facilities eligible for SBA financing.
The old “passive income” guidelines singled out office suites, shopping centers, flea markets and mobile home parks as well as self storage facilities as ineligible unless they provided “sufficient services.” It’s possible some of these business types could now be eligible under the new rules so we will see if lenders will embrace them or not.
Refinance or Purchase of Multiple Properties Now Possible
In addition to mini storage businesses now being eligible there has also been a change in maximum SBA eligibilty which means that owners of multiple mini warehouse facilities can now refinance or purchase additional facilities.
Specifically, the maximum SBA eligibility is now $5 million for “regular” loans and $5.5 million for green or energy efficient loans.
What could this mean for the owner of a mini warehouse? OPPORTUNITY
Let’s say you currently have an SBA loan of $1.5 million on a mini storage facility and you have a balloon coming due. Under the new guidelines you could refinance the current loan into a long term (possibly 20 to 25 year) 7a or 504 loan and still have $3.5 million of SBA eligibility available for the refinance or purchase of other businesses. This is significant news for any business owner either trying to improve cash flow or acquire other businesses and there is probably no better time than now for a successful (”approvable”) business owner to be out looking for bargains on commercial real estate.
Yesterday I spoke to the owner of a self storage business who is doing just that. He wants to refinance his current business which is suddenly SBA eligible and he wants to acquire a competitor who is struggling and wants out. And he will still have eligibility “left over” for another property.
I don’t think that people fully appreciate yet what a significant opportunity the new loan sizes and increased eligibility really are…and it is obviously not just big news for the self storage industry but ALL SBA eligible businesses.