Commercial Loans

6 Replies

Hey guys I haven't posted anything in a while, took some downtime during the holidays. However, I've had a great deal placed at my feet early in 2016. It's approx. a 220 unit storage facility with about an acre and a half of growth opportunity. The ladies husband who owned it passed away and she doesn't care to deal with the hassle of the business. She hasn't given me a set price yet but I'm figuring around 4-600k for the units and land. It's not in the greatest areas in town but still a great investment. My question is what is the best way to go about getting a commercial business loan with only putting 10-15% down? I know most I've seen require 25+%, any ideas??

I don't think you'll find a lender that will do it for 10% or 15% down. Not on a true commercial property. That being said, is there any chance that the seller will do a 10% 2nd on the property? 

i.e. You put down 15%, you get a 1st mortgage with the bank for 75% and the seller takes gives you a mortgage for 10% of the purchase price?

If so, that might be one way.

Another one might be to find a money partner that would lend you the 10% you need and either give you terms or maybe take some of the equity in the project.

Better to have a percentage of a great deal than 100% of nothing....

John,

I am a commercial credit analyst in South Dakota, and if I were you I would try to find a lender who has experience working the the SBA. Their 504 loan program is now available for storage facility purchases/refinances. I was actually just talking to one of our lenders about it this morning and I believe the SBA will go as low as 15% down and their rates are fixed for 20 yrs. This does depend on your financial strength but could be a good option if the current owner doesn't want to do a carry back. Best of luck with your purchase and pass some of that luck this way I've had a hell of a time trying to get a second facility in my portfolio.

Regards,

Josh Anderson

The SBA is a great recommendation. I talked to a couple of SBA lenders when I was shopping my sefl-storage loan and I was told that the downpayment is based on how the property performs. Evidently there is actually no minimum downpayment from what I understand. I know for sure they will go as high as 90% LTV. I didn't go with them as the rates are little higher, but still pretty good. PM me if you want a couple of contacts at banks that specialize in SBA loans for self-storage. Good luck!

I would agree with @Josh Anderson , the SBA 504 program only requires 10-20% down (depending on how long the business has been around, and if they consider storage units as "Special Purpose" ( I don't believe they do)). While the SBA has pretty lax requirements, you would still need to find a lender willing to go to those terms. You may have better luck asking for a 20% or so carry-back from the sellers, that's not uncommon or unreasonable in the commercial world. 

A lot of lenders like that idea because it gives the former owners some incentive to not "burn the business" when it changes hands. if they have $100,000 on the line, they are going to do everything they can to make sure it is successful for you.

@John Weir . SBA financing would be a great fit for a self-storage facility. I work as an SBA lender that can do National SBA loans on commercial real estate such as this. The typical down payment for a deal like this would be 10% on a 504 loan. You may be asked to inject more depending on variables of the deal. You can ask for seller carry back but for it to count as equity it would have to be on full standby (no payments) for a min of 2 years. The other aspect of a deal like this is operator experience. Industry experience is needed to be considered when running a 220 unit facility. Does it have on-site management living area or how will it be managed? What are the traffic counts and marketability for the location? All things to consider. You can PM for more questions or info you may need on SBA.