1. Are you a direct lender?
No, we are mortgage brokers and have closed hundreds of millions of dollars in transactions.
2. How many resources do you submit to?
It depends on if we are trying to do a self-storage loan conventional, SBA, private or some other way. In this case, when we refer to conventional, we are referring to anything that is not government backed such as SBA or USDA B&I, i.e. banks, insurance companies, CMBS, etc. If it is an SBA loan, we usually do not submit to more than two lenders because we know who is active in the space. It is not unusual for us to submit to a dozen lenders on a conventional basis. We normally submit a commercial write-up which is prepared in an Excel spreadsheet with top level numbers to multiple lenders to gauge their level of interest.
3. Do you pull credit?
Normally we do not pull credit because it will pull down your score. We normally ask that a borrower pull a tri-merge from companies such as Credit Karma or Free Credit Report so we can have an idea of where they stand both credit and personal debt. Ultimately the lender will pull their credit at time of application and at closing so we do not want to add to it. If you pull from one of the sources above, it is a “soft” pull and even though it is listed as an inquiry, it will not affect your score.
4. Do you charge an upfront fee and how are you compensated?
We do not charge upfront fees on self-storage facility loans. The way we are compensated will depend on the type of financing that is done. If it is done as an SBA 7(a), 504 or USDA B&I Rural Development loan, we usually will receive compensation from the lender. If we do this with any other type of financing, we will have a fee agreement with the borrower. We do not tie borrowers into long term exclusive agreements and we do not charge them a fee as soon as they receive a commitment letter. Any fees due to us will be due at closing. If the loan is very small (Less than $500,000) and the loan is done SBA, we may charge a small additional fee due to the loan size being small.
5. Where do you find your sources?
We actually have a fairly sophisticated way of finding lenders for self-storage loans. We will do”recent sales” searches, UCC lien filings, FOIA requests (Freedom Of Information Act) etc. to find the most recent transaction and find who the mortgage holder of record is.
6. How do you determine which type of financing will be used?
It ultimately will be determined by the borrower if they are agreeable to what we may suggest. Different types of financing will appeal to different situations. If there are poor financials, private financing might be the most appropriate. If a borrower is looking for the smallest down payment, SBA may be the most appropriate. If the borrower is only looking at rate / term as the most appropriate, bank financing may be most appropriate. One things that borrowers frequently do not take into account is Cost Of Funds (COF) and Return On Investment (ROI). Some people are so rate sensitive that they might be oblivious to their Return On Investment or their Cost Of Funds. Your calculator will never lie. Consider all options.
7. What is the rate index being used for loans?
Each lender might have their own index that they go by. Regardless if a lender goes by Prime, LIBOR, Treasury indexes, internal rates, it will be clearly disclosed. If it is a SBA 7(a) loan, most loans are done using Prime as an index, but some give the option to use LIBOR. If it is a SBA 504 loan, it will be a combination of Prime plus a 10 year bond debenture.
8. Is fixed rate financing available?
Most self-storage loan products have fixed rate financing available. The major exception to this is SBA 7(a) financing, where many loans are done with a floating rate. SBA 7(a) loans that are dong with fixed rate pricing are usually larger banks that portfolio their loans and offer fixed rate financing for SBA 7(a) loans but normally not longer than 3-5 years.
9. How long does it take to get a loan approved?
We frequently tell people the speed of the self-storage financing is usually dictated by the weakest link. The fact remains though, in the past few years, deals take longer to be approved than in years past due to the overhauls that have been dictated by federal regulators. If you own multiple companies with multiple business returns, it will take longer to be approved because more work is required. Many people are under the misperception that SBA financing takes longer. SBA financing really does not take longer, it is usually that some banks do SBA loans quicker and more efficiently than others. It is true that some SBA loans take longer if there are morals issues (arrest record, etc.). A local bank will probably be the quickest because they are right there by the property but that certainly doesn’t insure they will approve you. Count on a minimum of three weeks for approval.
10. What if you do not have sufficient down payment, can you use a seller second?
Seller seconds are normally allowed, but cash flow will need to be sufficient to support both debts. If cash flow is insufficient, normally the seller will need to go on “standby” and receive no payments for at least a year or two.
To pre-qualify for financing, download the following forms and provide the following information:
- Loan Application (pdf) (Word) or Apply Online
- Personal Financial Statement (pdf) (Word)
- Resume (pdf) (Word)
- 2013 Year End Business Financials
- 2014 Year-To-Date Business Financials
This is a general guideline for documents normally needed depending on the type of financing being applied for.